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In 2005 IBM had a return on equity of26.7 percent,

In 2005 IBM had a return on equity of26.7 percent, whereas Hewlett-Packards return was only 6.4 percent.

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In 2005 IBM had a return on equity of26.7 percent, whereas Hewlett-Packardâ€™s return was only 6.4 percent. Use the decomposed ROI framework to provide possible reasons for this difference based on the databelow:

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IBM HP 9.0% 2.16 NOPAT/Sales Sales Net Assets Effective After-Tax Interest Rate Net Financial Leverage 2.7% 2.73 1.190 0.16 12.4% 0.42

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ROE can be decomposed as follows Using this decomposition ROE depends on a companys return on assets which can in turn be decomposed into return on sales and operating asset turnover and leverage gain ...View the full answer

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Question Posted: Feb 11, 2015 02:43 AM

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