Profitability in relation to investment, Finance Basics

Assignment Help:

Profitability in relation to investment - Profitability Ratio

a) Return on Investment (ROI) or return on total asset (ROTA)

= (Net profit/ Total asset) x 100

The ratio indicate the return on profit from investment of Sh.1 in total assets e.g a ratio of 20% means Sh.10 of total asset generated Sh.2 of net profit.

b) Return on equity (ROE) = (Net profit/ equity) x 100

It is called also like or Return on net worth (RONW) or Return on shareholders' equity (ROSE)

The ratio signify the return of profitability for every one shilling of equity capital added via the shareholders as a ratio of 25% means one shilling of equity generates Sh.0.25 profit attributable to ordinary shareholders.

C) Return on capital employed ROCE =   (Net profit/ Net Asset (Capital employed)) x 100

It is called also like or Return on net asset (RONA).

These ratios show the returns of profitability for every single shilling of capital working in the firm.


Related Discussions:- Profitability in relation to investment

Underwriting - stock market, Underwriting - Stock Market 1. This is th...

Underwriting - Stock Market 1. This is the supposition of risk relating unsubscribed shares 2. When new shares are issued, they might be beneath -written or unsubscribed. A

Allocation of financial resources, Allocation of financial resources to the...

Allocation of financial resources to the different department can be done based on the past experience of the expenses and other available relevant information. Looking at the requ

Determine the classification of new issue market, Classification of New Iss...

Classification of New Issue Market New market can be classified as: (i) A market where firms go to public for the first time through initial public offering (IPO). (ii

Explain financial funds and supply , What does it mean to say that individu...

What does it mean to say that individuals as a group are net suppliers of funds for financial institutions? What do you think the consequences might be in financial markets if indi

Reasons for different interest rate, Reasons for Different Interest Rate ...

Reasons for Different Interest Rate Interest rates may differ in different market and market segment since: i) Size of the loan: Deposits above specific amounts into the

Important points for capital market authority, Important Points for Capital...

Important Points for Capital Market Authority Apart from the above roles, CMA can assume the given steps to encourage progress of stock exchanges in US or other countries.

Who is floor broker, Who is Floor Broker Floor brokers aren't many in n...

Who is Floor Broker Floor brokers aren't many in number. They execute orders for fellow  members  and  receive  a  share  brokerage  commission  charged  by  a commission broke

Significant features of partnership, Significant Features of Partnership ...

Significant Features of Partnership 1) The capital is contributed by the partners and no appeal is made to the public. 2) Like the sole proprietorship, a partnership has a l

Assignment, Discuss the applicabilty of such cycle to poultry business(cons...

Discuss the applicabilty of such cycle to poultry business(consider broilers)

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd