Accounting Ratio Analysis

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6 Terms

1
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ROE

Net Income/Equity, Measure the profitability of a company based on its use of equity

2
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ROA

Net income/Assets, Measure profitability of a company based on its use of aseets

3
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Duponts Model

Profit Margin x Asset Turnover x Financial Leverage

4
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Profit Margin

Net income/Revenue, profit company earns from each dollar sale

5
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Asset Turnover

Revenue/Assets, measures the efficiency of how profitable assets are in generating sales

6
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Financial Leverage

Assets/Equity, measures how much a company relies on debt and other liabilities compared to equity to finance its assets