Question

Please define what these tell you about a company's performance; what are the good/ bad values for measure:

1. Return on Equity (ROE)

2. Return on Assets (ROA)

3. Return on Capital (ROC)

4. Return on Invested Capital (ROIC)

5. EBITDA and EBITDA Margin %

6. EPS and EPS Growth %

7. Free cash flow

Answer 1

1. Return on equity will be determining the total rate of return made for for equity share holder at it is preferred higher

2. return on asset is the total rate of return generated on the Asset employed and it is before discharging of the debt capital and higher return on asset is desired

3. higher rate of return on capital is desired because it is representing the total rate of return on capital invested

4. return on invested capital will be reflecting the return on the investment and it will also include various functions of debt capital and equities in order to determine the overall rate of return generated

5. EBITDA and EBITDA Margin will be reflecting that total earning which are made by the investor's before payment to the debtholders and it is reflecting the ability of the company in order to make higher profits before interest and the margins.

6.Earning per share and Earning per share growth will be reflecting that total earning on the front of shareholders of the company and they will always want the earnings to increase in order to share price to grow

7. free cash flows are the cash flows which are available to the company and they are reflecting that overall cash flows which are left for the company after investment into various capital investment project and other working capital so it will reflect the ability of company to generate cash.