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Learn how to calculate and interpret ROE, a measure of how well a company uses equity to generate income. Find out how ROE varies across industries, how it relates to sustainable growth rate, and what factors affect its value.
Learn how to calculate and interpret return on capital (ROC), a ratio that measures how well a company turns capital into profits. Compare ROC with other metrics like ROCE, ROE, and WACC.
Learn how to calculate ROA, a financial ratio that measures the profitability of a company relative to its total assets. Find out why ROA is important, how debt and leasing affect it, and how to compare it with other companies in the same industry.
The DuPont identity breaks down return on equity (ROE) into its components -- profit margin, total asset turnover, and financial leverage -- so that each one can be examined in depth. Learn how to use the DuPont identity to analyze a company's profitability, efficiency and debt structure.
Learn how to calculate and interpret ROI, a key financial ratio that measures the gain/loss from an investment in relation to the initial investment. Find out the advantages, disadvantages, and variations of using ROI for different situations and applications.
Learn how to calculate EVA, a measure of profitability and management performance that compares net operating profit to the total cost of capital. See the formula, components, example and importance of EVA.
In order to derive the Gordon Growth Model, we’ll need to find the sum of the infinite geometric series using the following formula: Gordon Growth Model Example. Suppose that Company A has a current stock price of $100. It pays a $1 dividend per share, which is expected to increase by 10% per year.
CAGR is a measure of growth that represents the consistent rate at which an investment would have grown had it compounded at the same rate each year. Learn how to calculate CAGR, why it's important, and how it compares to other financial ratios and formulas.
Operating income is the amount of revenue left after subtracting operating expenses and cost of goods sold (COGS). It is a measure of profitability that is directly related to a company’s operations. Learn how to calculate operating income, why it is important, and how it differs from net income and EBITDA.
Book value per share is the ratio of available common equity to the number of outstanding common shares. It can be used to compare a company's stock value with the market value or other companies, but it has some limitations and drawbacks.