Question

Why is ROE considered one of the best measurements of top managements performance .

A PE ratio of 20:1 means that an investor is paying $20 for every dollar of income the company is generating. (true or false) The ECB is charging negative interest rates to its member banks. What is the logic behind this?

Answer 1

ANS

ROE or return on equity is considered as to be the best tool for the measurement of the performance of the top level management as it tells the profit that the company is earning with respect to the capital of the different shareholders that is invested in the firm. It measures the efficiency of the top level management às the decisions that are taken by the top level management directly affects the value of the stocks in the company. The ROE is considered as one of the best tool for the measurement of the performance of the top level management as the ROE can be used for comparision of the growth of the firm with others so the top level management can be held accountable for that directly.

True the PE ratio or price to earning ratio of 20:1 means that  an investor is paying $20 for every dollar of income the company is generating.

The negative interest rates is the interest rates that the banks charge when the people keep their money with the banks. The logic behind ECB or European Central Bank charging the negative interest rates from the customer is that the banks are at that period the banks are usually short of funds so to maintain an adequate amount of funds with the banks so that banks can give loans to the people and can operate their normal functioning.