return on assets

50
• Return On Assets https://store.theartofservice.com/the-return-on-assets- toolkit.html

Upload: amber-blake

Post on 27-Dec-2015

229 views

Category:

Documents


10 download

TRANSCRIPT

• Return On Assets

https://store.theartofservice.com/the-return-on-assets-toolkit.html

ExxonMobil - Ratios overview

1 Exxon had better return on assets (6.75 percent) and return on equity (14.57 percent) ratios (Mobil’s were

3.95 percent and 9.01 percent correspondingly)

https://store.theartofservice.com/the-return-on-assets-toolkit.html

ISO 9000 - Reasons for use

1 showed that certified organizations achieved superior return on assets

compared to otherwise similar organizations without certification

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Rate of return

1 ROI is an abbrevation of return on investment, i.e. return per dollar

invested. It is a measure of investment performance, as opposed to size (c.f. return on equity, return

on assets, return on capital employed).

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Rate of return - Uses

1 Ratios typically used by financial analysts to compare a company’s

performance over time or compare performance between companies

include return on investment (ROI), return on equity, and return on

assets.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Organizational performance

1 performance (profits, return on assets, return on investment, etc.); (b) product

market performance (sales, market share, etc.); and (c) shareholder return

(total shareholder return, economic value added, etc.).Richard et al. (2009):

Measuring Organizational Performance: Towards Methodological Best Practice.

Journal of Management. The term Organizational effectiveness is broader.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

International Finance Corporation - Financial performance

1 The IFC's return on assets|return on average assets (GAAP basis)

decreased from 3.1% in 2010 to 2.4% in 2011

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Financial analysis - Method

1 :Net income / total assets = return on

assets (ROA)

https://store.theartofservice.com/the-return-on-assets-toolkit.html

ISO 9002 - Reasons for use

1 showed that certified organizations achieved superior return on

assetshttp://www.bsi-emea.com/Quality/CaseStudies/Interstate.pdf compared to otherwise similar

organizations without certification

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Private equity - Leveraged buyout

1 This kind of financing structure leverage benefits an LBO's financial sponsor in two ways: (1) the investor itself only needs to provide a fraction of the capital for the acquisition, and (2) the returns to the investor will be enhanced (as long as the return on

assets exceeds the cost of the debt).Ulf Axelson, Tim Jenkinson, Per

Strömberg, and Michael Shttps://store.theartofservice.com/the-return-on-assets-toolkit.html

Leverage (finance) - Abbrevations

1 * ROA is Return on assets

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Enterprise asset management

1 By managing assets across the facility, organizations can improve

utilization and performance, reduce capital costs, reduce asset-related

operating costs, extend asset life and subsequently improve ROA (return on

assets).

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Savings and loan association - Decline of SLs

1 # Decline in the effectiveness of Regulation Q in preserving the

spread between the cost of money and the rate of return on assets,

basically stemming from inflation and the accompanying increase in market

interest rates.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Savings and loan association - Decline of SLs

1 # Absence of an ability to vary the return on assets with increases in the

rate of interest required to be paid for deposits.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Modigliani-Miller theorem - Proposition II

1 * r_0 is the company cost of equity capital with no leverage (unlevered cost of equity, or return on assets

with D/E = 0).

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Liquidity - The effect of market liquidity on asset values

1 Theory and empirical evidence suggests that investors require

higher return on assets with lower market liquidity to compensate them for the higher cost of trading these

assets.Yakov Amihud and Haim Mendelson, “Asset Pricing and the

Bid-Ask Spread.” Journal of Financial Economics 17, 1986

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Adjusted present value - APV formula

1 The discount rate used in the first part is the return on assets or return on equity if

unlevered.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Adjusted present value - APV formula

1 Take Present Value (PV) of FCFs discounted by Return on Assets %

(also Return on Unlevered Equity %)

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Business corporation - Liquidations

1 Voluntary liquidations occur when the company's members decide voluntarily to wind up the affairs of the company. This may be because they believe that the

company will soon become insolvent, or it may be on economic grounds if they believe

that the purpose for which the company was formed is now at an end, or that the company is not providing an adequate

return on assets and should be broken up and sold off.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

IAS 19: Employee Benefits - Accounting for defined contribution pension plans

1 Under USGAAP (ASC715) there is the publication of an EITF Abstract in 2003 which allows categorizing the defined contribution plans with a minimum guarantee as a hybrid pension plan. Basically it requires for these

hybrid plans to project the past contributions including return (Minimum Reserve) with the Weighted average return on assets and then to actualize it with the discount rate over the

remaining period of the benefit (Future Service).

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Deflation (economics) - Causes and corresponding types

1 In more recent economic thinking, deflation is related to risk: where the risk-adjusted return on assets drops

to negative, investors and buyers will hoard currency rather than invest it, even in the most solid of securities

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Building society - 1980s and 1990s

1 This behaviour resulted in a return on assets for building societies which was at least as high as Plc banks

and, in the absence of distribution, led to rapid accumulation of reserves

https://store.theartofservice.com/the-return-on-assets-toolkit.html

DuPont analysis - ROA and ROE ratio

1 The 'return on assets (ROA) ratio' developed by DuPont for its own use

is now used by many firms to evaluate how effectively assets are

used. It measures the combined effects of profit margins and asset

turnover.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return on equity - The DuPont formula

1 Randall and Gray, Gary; Applied Principles of Finance (2006)

Increased debt will make a positive contribution to a firm's ROE only if

the matching Return on assets (ROA) of that debt exceeds the interest rate

on the debt.Bodie, Kane, Markus, Investments

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return (finance)

1 'ROI' is an abbreviation of return on investment, i.e. return per dollar

invested. It is a measure of investment performance, as opposed to size (c.f. return on equity, return

on assets, return on capital employed).

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Transfer pricing - Tested party and profit level indicator

1 Testing requires determination of what indication of profitability should be used.OECD 3.41, 26 CFR 1.482-5(b)(4). This may be net profit on the transaction, return on assets

employed, or some other measure. Reliability is generally improved for TNMM and CPM by using a range of results and multiple year data.OECD

3.43, 3.44, 26 CFR 1.482-1(e)(2).https://store.theartofservice.com/the-return-on-assets-toolkit.html

Equity Bank Group - History

1 The Bankerlisted Equity Bank among the Top 1,000 Banks in the World

with the highest return on assets in the African continent, generating a

rate of 6.84 per cent on assets employed.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Strategy dynamics - The need for a dynamic model of strategy and performance

1 return on sales or return on assets) was neither interesting to investors – who value the prospect of increasing future cash flows – nor sustainable

over time

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Growth–share matrix - Overview

1 They depress a profitable company's return on assets ratio, used by many

investors to judge how well a company is being managed

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Finance lease - Impact on accounting

1 * Under operating lease conditions, lease obligations are not recognized;

therefore, leverage ratios are understated and ratios of return

(return on equity|ROE and return on assets|ROA) are overstated.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return on assets

1 The 'return on assets' ('ROA')shows percentage how Profit (accounting)|profitable a company's assets are in generating revenue.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return on assets

1 Return on assets gives an indication of the capital intensity of the

company, which will depend on the industry; companies that require

large initial investments will generally have lower return on assets

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return on assets - Usage

1 Return on assets is one of the elements used in financial analysis using the Du Pont

Identity.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

ROSCA - Rotating or accumulating?

1 As of the end of June 2012 development agencies (including CARE, Oxfam, CRS and

PLAN) were carrying out projects reaching 1.8 million members in 23 countries, mostly in

Africa. The Savings Group Information Exchange, a project of the Bill and Melinda

Gates Foundation, provides researchers with an on-line database where indicators like savings and loans per member, country, return on assets and percent of female

members can be compared.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Cash cow - Usage

1 Cash cows are products or services that have achieved market leader status, provide positive cash flows and a return on assets (ROA) that exceeds the market growth rate

https://store.theartofservice.com/the-return-on-assets-toolkit.html

ROA (disambiguation) - Finance

1 *Return on assets, a financial metric

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return on capital employed - The formula

1 It is similar to Return on assets|Return on Assets (ROA), but 1 takes into account sources of financing.

NOPAT|Net Operating Profit After Tax (NOPAT) is equal to EBIT * (1 - tax) -- the return on the capital employed

should be measured in after tax terms.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Return on capital employed - Capital employed

1 In the denominator we have net assets or capital employed instead of

total assets (which is the case of Return on Assets). Capital Employed has many definitions. In general it is the capital investment necessary for

a business to function. It is commonly represented as asset|total assets less current liabilities (or fixed

assets plus working capital requirement).

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Just in Sequence

1 When implemented successfully, JIS improves a company's Return on assets|return on assets (ROA),

without loss in flexibility, quality or overall efficiency

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Weighted average return on assets

1 The 'weighted average return on assets', or 'WARA', is the collective rates of return on the various types

of tangible and intangible assets of a company.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Sustainable growth rate - Relationship between revenue growth, total shareholder value creation and profitability

1 Return on Assets (ROA), Return on Sales (ROS) and Return on Equity

(ROE) do rise with increasing revenue growth up to 10 to 25% and then fall

with further increasing revenue growth rates.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Business-agile enterprise - Overview

1 Business-agile enterprise improves financial measurements such as

margins, profitability, time to market, revenue growth, earnings per share,

ebitda (earnings before interest, taxes, depreciation amortization,

return on equity), return on assets, and return on investments.

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Business-agile enterprise - Business Technology Management Institute, Agility research

1 * Return on assets – 8% higher

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Business-agile enterprise - Agile Companies exhibit superior Business Value relative to their industry groups.IT Portfolio Management and IT Savvy – Rethinking IT Investments as a Portfolio, MIT Sloan School of

Management, Center for Information Systems Research, Summer Session, Peter Weill, June 14, 2007. Research was conducted by MIT via the SeeIT/CISR survey of 629 firms – 329 of these firms are listed

on US stock exchanges. The work was financed by the National Science Foundation grant number IIS- 0085725. Copyright ©

Massachusetts Institute of Technology, 2007. This work was created by MIT's Sloan Center for Systems Research (CISR)

1 * Profitability via sharing – firms with above average percentage of shared applications it savvy have return on

assets 30% above their industry's median

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Fixed currency - Price specie flow mechanism

1 Adjustment under a gold standard involves the flow of gold between countries resulting in Equalization payments|equalization of prices

satisfying purchasing power parity, and/or equalization of rates of return

on assets satisfying interest rate parity at the current fixed exchange

rate

https://store.theartofservice.com/the-return-on-assets-toolkit.html

The Banker - Features and awards

1 The awards are the industry’s most widely used index of global banking, and are

internationally recognised as the definitive guide to the soundness, strength and

profitability of banks.[http://www.thebanker.com/Media/Files

/The-Banker-Media-Pack-2011 Media Pack] The Banker The banks are assessed by Tier 1 capital, with secondary rankings by assets, capital/asset ratio, real profit growth, profit

on average capital, and return on assets

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Gail Kelly - Career in Australia

1 George was seen as a possible takeover target (especially after the purchase of Colonial State Bank by the Commonwealth Bank) but Kelly

increased the bank's Profit (accounting)|profitability and

achieved much higher levels on return on assets

https://store.theartofservice.com/the-return-on-assets-toolkit.html

State Bank of Travancore

1 Return on Equity is at 15.54.%, and the

Return on Assets stood at 0.66.%

https://store.theartofservice.com/the-return-on-assets-toolkit.html

Bank of Mongolia - Ongoing activities

1 Profit (accounting)|Profitability of banks was high compared to most advanced countries, which have

return on assets ratio of 2.7 per cent in 2007

https://store.theartofservice.com/the-return-on-assets-toolkit.html