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2. Return on Total Assets ( or RO Capital Investment) [YF]: answers the question of how much the company earns on the capital it uses. When both ROE and ROA are high (10% or more), the company is considered to have good potential for growth and earnings.
ROA = net income
total assets
3. Retention Rate [C-AR]: percent of a company's net earnings reinvested into the business instead of being paid out in dividends to investors. A company that grows entirely by reinvesting its earnings in the business is said to be self-financing (using 100% of internally generated cash for capital expenditures). Generally, the most successful companies are self-financing.
retention rate = net earnings - dividends
net earnings
4. Reinvestment Rate [C]: helps to determine internal growth rate potential. There are only two ways in which a company can acquire money for growth: by plowing its own net earnings back into its business or by obtaining new debt or equity capital from outside the company. The higher the reinvestment rate the better.
reinvestment rate = ROE x retention rate
5. Profit Margins [YF / VL]: indicates the percentage of a companies sales that becomes profits at various levels of the companies income statement. operating profit margin reflects the relationship of before-tax profits to income from sales (tells an investor how profitable the company's products are to manufacture and sell). An operating profit margin of less than 8% is usually regarded as unsatisfactory for a manufacturing company. Net profit margin measures a company's profitability after all costs and expenses, including taxes, have been paid. A high net profit margin means a company is managing to turn a good percentage of its sales into net income. 5 - 6% is typical for U.S. companies, although rates vary from one industry to another.
operating profit margin = operating profits
sales
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