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Compute the 2016 ROA and ROE

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Reference no: EM133097893

Question:

a. Use the profit margin and asset turnover to compute the 2015

ROA for OBMM. Now introduce the equity multiplier to find ROE.

b. Use the summary financial information to compute the 2016 ROA and ROE. Use the same procedures to calculate these measures as you did in part a.

c. On the basis of your calculations, describe how each of the three components (profit margin, asset turnover, and leverage) contributed to the change in OBMM's ROA and ROE between 2015 and 2016. Which component(s) contributed the most to the change in ROA? Which contributed the most to the change in ROE?

d. Generally speaking, do you think that these changes are fundamentally healthy for the company?


 2016 ($ in millions) 2015 ($ in millions)
Sales revenue $262.60 $180.60
Total assets $304.30 $130.40
Net earnings $31.30 $18.50
Shareholders' equity $218.10 $113.30

Reference no: EM133097893

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