Why does the return on equity differ between Company A and Company C? Is this difference attributable to operating performance? Does return on assets best reflect operating performance? If not, which ratio does and why?
Answer to relevant QuestionsExhibit 7.16 presents the income statement and balance sheet for HealthCo,a $665 million health care company. Compute NOPLAT, average invested capital, and ROIC. Assume an operating tax rate of 25 percent and a marginal tax ...Using the data presented in Question 1, decompose ROIC into operating margin and capital turnover for each company. Which ratio is the key determinant of ROIC: operating margin or capital turnover? Using the methodology outlined in Exhibit 9.10, forecast the operating items on next year's balance sheet for PartsCo. Forecast each balance sheet item as a function of revenue, except inventory and accounts payable, which ...A colleague suggests that a 6 percent growth rate is too low for revenue, profit, and cash flow growth beyond year 5. He suggests raising growth to 12 percent in the continuing value. If NOPLAT equals $26.6 million, return ...MarineCo has unfunded pension liabilities valued at $200 million, recorded as a long-term liability. MarineCo has detailed a potential legal judgment of $100 million for defective engines in its annual report. Since ...
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