onInvestedCapital(财务报表分析,台湾中兴大学).pptxVIP

8CHAPTERMcGraw-Hill/Irwin? 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.Return on Invested CapitalReturn on Invested CapitalImportance of Joint Analysis? Joint analysis is where one measure is assessed relative to another? Return on invested capital (ROI) is an important joint analysisReturn on Invested Capital ROI RelationROI relates income, or other performance measure, to a company’s level and source of financingROI allows comparisons with alternative investment opportunitiesRiskier investments are expected to yield a higher ROIROI impacts a company’s ability to succeed, attract financing, repay creditors,and reward ownersReturn on Invested CapitalApplication of ROIROI is applicable to:(1) evaluating managerial effective-ness(2) assessing profitability(3) earnings forecasting(4) planning and controlReturn on Invested CapitalEvaluating Managerial Effectiveness? Management is responsible for all company activities? ROI is a measure of managerial effectiveness in business activities? ROI depends on the skill, resourcefulness, ingenuity, and motivation of managementReturn on Invested CapitalMeasuring Profitability? ROI is an indicator of company profitability? ROI relates key summary measures: profits with financing? ROI conveys return on invested capital from different financing perspectivesReturn on Invested CapitalAssists in Forecasting Earnings? ROI links past, current, and forecasted earnings with invested capital? ROI adds discipline to forecasting? ROI helps identify optimisticor pessimistic forecasts? ROI aids in evaluating prior forecast performanceReturn on Invested CapitalFor Planning and ControlROI assists managers with:? Planning? Budgeting? Coordinating activities? Evaluating opportunities? ControlComponents of ROIDefinitionReturn on invested capital is defined as:Components of ROIInvested Capital Defined? No universal measure of invested capital exists? Different measures of invested capital reflect differ