CHAPTER SEVEN
Return on Investment Measurements
THIS CHAPTER IS AIMED squarely at measurements that can be used to determine a company's ability to create a return on investment. These measures encompass net worth, several types of return on assets and equity, earnings per share, economic value added, and return on dividends. They can be used by investors to determine what to pay for a company's shares as well as to measure the return on investment. Company management can use these measures to determine its ability to generate a reasonable rate of return. The measures discussed in this chapter are:
| Net Worth Book Value per Share Tangible Book Value Return on Assets Employed Return on Infrastructure Employed Return on Operating Assets Return on Equity Percentage Return on Common Equity Financial Leverage Index | Equity Growth Rate Earnings per Share Percentage Change in Earnings per Share Economic Value Added EVA Momentum Relative Value of Growth Dividend Payout Ratio Dividend Yield Ratio |
NET WORTH
Description: A company's net worth is the amount of money that is left over after all of its liabilities have been deducted from its assets. This is theoretically the amount of funds that would be left over for distribution to investors if a company were to be liquidated. A negative net worth is a reasonable indicator of serious fiscal problems. This measure is sometimes used by lenders, who may require that a minimum net worth be maintained for a loan to be left outstanding.
Formula: ...
