BU127 Lecture Notes - Lecture 13: Inventory Turnover, Asset Turnover, Asset
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BU127 Full Course Notes
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Return on an equity security investment: dividends, investors, increase in share price. Roe = net profit margin times asset turnover times financial leverage. High value or product differentiation rely on r&d and product promotion to convince customers of the superiority of your product. Low cost rely on efficient management of trade and other accounts receivable, inventory, and productive assets to produce high asset turnover. Financial statement users: management uses accounting data to make product pricing and expansion decisions, external decision makers use accounting data for investment, credit, tax, and public policy decisions. Ratio analysis or percentage analysis is used to express the proportionate relationship between two different amounts. Express each item on a particular statement as a percentage of a single base amount: net sales on the statement of earnings, total assets on the statement of financial position. Profitability is a primary measure of the overall success of a company. Return on equity = net earnings over average shareholder"s equity.
