January 2006
Beginner
416 pages
8h 7m
English
Profitability margins reflect the returns on a company’s total investments without regard to the investment date. Some money managers gain insight by measuring the returns on the most recent investments. They do that by computing marginal return on equity, capital, or assets.
You can calculate the marginal return on assets by dividing the change in net income by the change in asset value over the period. To calculate the marginal ROA for the past year, calculate the year-over-year change in net income and divide it by the asset growth over the year. Despite the logic, I found the results too volatile to be of value, as Table 11-18, showing Safeway’s marginal ROA return history illustrates.
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