Performance Measures:Sales/Return on Equity & Shrhldr Return
1. Which two of the six performance measures do you think are the most useful indicators of how well a company is being managed?
2. Is return on sales or return on equity a better basis on which to compare the performance of the companies listed?
3. Several companies are highly profitable, yet have delivered negative returns to their shareholders. How is this possible?
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Here are the answers to your questions:
1. Which two of the six performance measures do you think are the most useful indicators of how well a company is being managed?
A higher return on equity means more profit on shareholder's investments as a whole.
It is the profit versus what is invested. This shows how well the company is using money. Here is a definition of it from the web: http://www.bridgefieldgroup.com/bridgefieldgroup/glos8.htm
And here is another worthwhile link: http://beginnersinvest.about.com/od/financialratio/a/aa040505.htm
This is one of the factors Warren Buffett is purported to look at. In theory a business with a high return on equity is better poised for growth. It also takes into account-retained earnings from ...
Solution Summary
This detailed solutions outlines the importance of six performance measures and picks the two that are most useful indicators of a company's performance.It also discusses if return on sales or return on equity is a better basis to determine a company's performance, and discusses negative returns to shareholders. It includes links and examples.