what is ROA, what is ROE and what each of these ratios signify?

Expert Solution

ROA is return on assets
ROA = Net income/Total assets
ROA signifies how profitable a company is relative to its assets.
ROA also tells us how efficient a company is at using its assets
to generate earnings.

ROE is return on equity
ROE = Net income/Shareholders's equity.
Shareholders equity = Total assets - total liabilities.
ROE is the return on net assets.
ROE also tells us how efficient a company is at using its net assets
to generate earnings.

jeff jeffy answered 3 years ago

Suppose Bank Z has ROE of 12% and ROA of 1%. If capital-to-asset ratios (simply called...

Suppose Bank Z has ROE of 12% and ROA of 1%. If capital-to-asset ratios (simply called capital ratios) above 9% are considered to be well capitalized, is this bank well or poorly capitalized? Please support your answer with numbers.

The Rangoon Timber Company has the following ratios: Net sales/Total assets = 2.26; ROA 8.95%; ROE...

The Rangoon Timber Company has the following ratios: Net sales/Total assets = 2.26; ROA 8.95%; ROE 17.09%. What are Rangoon’s profit margin and debt ratio? (Round answer to 2 decimal places, e.g. 12.55 or 12.55%.) Rangoon’s profit margin is % and its debt ratio is .

financial ratios: ROE

Excerpts from the 2019 financial statements for Goodyear are as follows (dollars in millions):INSTRUCTIONS:Assume that you have some capital to invest and that you are considering an equity investment in Goodyear. Review the financial statements and comment on Goodyear as an investment. Support your recommendation the following financial ratios: ROE, return on sales, current ratio, and debt/equity ratio.

A firm has an ROA of 15%, profit margin of 3% and ROE of 30%. What...

A firm has an ROA of 15%, profit margin of 3% and ROE of 30%. What is its liability to total asset ratio? 50% 60% 70% 20% A firm has an ROA of 15%, profit margin of 3% and ROE of 25%. What is its liability to total asset ratio? 59.88% 60.05% 40.00% 20.16% A firm has an ROA of 15%, profit margin of 3% and ROE of 25%. What is its liability to total asset ratio? 59.88% 60.05% 40.00%...

What happens to ROA / ROE / ROIC if the company needs additional funding, which it...

What happens to ROA / ROE / ROIC if the company needs additional funding, which it raises through additional equity ?

How is the DuPont system useful in analyzing a firm’s ROA and ROE? What information can...

How is the DuPont system useful in analyzing a firm’s ROA and ROE? What information can analysts infer by breaking ROE into contributing ratios? What is the mathematical relationship between each of the individual components (net profit margin, total asset turnover, and assets-to-equity ratio) and ROE? Can ROE be raised without affecting ROA? How?

2. Carefully explain what the impact would be on a bank’s ROA and ROE from increased...

2. Carefully explain what the impact would be on a bank’s ROA and ROE from increased use by a bank of off-balance sheet (OBS) activities.

c. Write the equations for ROA, ROE, and EM; and explain the equations.

This particular company has an ROE of 13.25%, but an ROA of 1.47%. It has 75.5%...

This particular company has an ROE of 13.25%, but an ROA of 1.47%. It has 75.5% of its assets in Long-term Investments, and most of the rest is in Cash and Cash Equivalents. On the Liabilities side, Current Liabilities almost match Long-term Investments. It has an Equity Multiplier of 9.15. This company is a/an: Commercial Bank Savings & Loan Investment Bank Insurance Company Investment Company

Henderson's Hardware has an ROA of 15%, a 4.5% profit margin, and an ROE of 20%....

Henderson's Hardware has an ROA of 15%, a 4.5% profit margin, and an ROE of 20%. What is its total assets turnover? Do not round intermediate calculations. Round your answer to two decimal places. What is its equity multiplier? Do not round intermediate calculations. Round your answer to two decimal places.

Question