Question: So, in meta fashion, let's analyze our analysis structure. It consists of several important component parts (i.e., operating ROE [RNOA], non-operating ROE, NOPM, NOAT, and

So, in meta fashion, let's analyze our analysis structure. It consists of several important component parts (i.e., operating ROE [RNOA], non-operating ROE, NOPM, NOAT, and deeper level margin and turnover ratios), and the disaggregation into those components is a crucially important component itself. Why and how are these component pieces so important to our analysis structure? How does information quality fit into our analysis in this regard? Considering the ROE decomposition focus on operating activities in particular, investors and lenders place significant importance on management’s effectiveness in generating a high return on net operating assets. Is this measure important for management’s analysis of its own performance as well?

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The first and most important reason is that it allows us to see how each component contributes to the overall ROE This is important because it allows ... View full answer

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