Return on equity

The attitude of management is also an important factor in deter-TABLE 9-22 Return on Equity after Tax for Companies X and Y... 

Row 3 in Table 9-24 is the return on equity (ROE) of Eq. (9-130). In this case, the net worth is the tangible net worth representing the sum of the preferred and common stocks and the surplus and undistributed profits or retained earnings, less any intangible items such as goodwill, etc. 

A simple return on equity can be used as a yardstick. Utilities are required by regulators to set their rates to obtain a given rate of return. This return is usually constant over the years and from project to project, so management must choose among projects on some basis other than profit. 

In free enterprise projects, the return on equity will probably vary from year to year so an average would have to be used. However, use of an average would consider return in later years to be as valuable as income in the first year of operation, which is not true. 

In Honduras an energy-efficient power plant used all the wastes of a large lumber mill. It sold power to the grid, produced an internal rate of return on equity investment of 75%, and paid back the initial investment in about three years. 

Its emphasis on metrics is evidenced by the fact that SYSCO s top ten executive officers meet every Wednesday afternoon and review several hundred metrics for every one of the 157 operating units prior week s performance. SYSCO measures everything related to the receipt, movement, and delivery of products and services to its customers, to new business development, and to every expense and capital expenditure. It measures its return on equity on a weekly basis. 

InterTechnology Corp. (7) analyzed the energy plantation concept, in which fast growing plant species are cultivated for biomass yield. For a plantation of hybrid poplar, total capital and operating costs in an unspecified U.S. location - from clearing the land to delivering wood chips - require a total revenue per oven dry tonne of 15.25 (in early 1975 dollars)(Table III). This assumes a 15% after-tax return on equity. The estimate is based on a yield of 20.2 oven dry tonnes per hectare. For a yield of 9... 

Return on net worth (return on equity) Net profit after taxes/net worth 15%... 

Industry profits are indeed high related to those found in other sectors, notably service (retail and wholesaler) industries. This is due in part to the fact that the pharmaceutical industry is asset-intensive rather than labor-intensive, which leads to a low asset-to-sales turnover ratio, which in turn leads to a high rate of return on equity. Conversely, sectors with low asset-to-sales turnover ratios will have low rates of return on equity. 

Net profit margin Return on assets Return on equity... 

Return on equity, also known as return on investment (ROI), is a measure of how well the company can make profits from funds provided by owners or investors. High ROE levels are desirable because investors— similar to companies—are interested in maximizing their profits. ROA and ROE sometimes are used to gauge the manager s performance. All else equal, managers who make better financial decisions are better able to produce higher ROA and ROE ratios for their organizations. 

Return on equity A profitability ratio reflecting a company s ability to generate net income as a percentage of total investments by shareholders. 

The financial factors such as equity, debt, interest rates, depreciation, income tax rate, investment tax credit, entitlement, rate of return on equity and/or DCF rate. 

The author stated that gas cost would be less than 5/MMBtu on a utility-financing basis with 12% return on equity (13). 

The central financial assumption for the calculation of second generation leve-lized PV electricity and H2 prices is the assignment of the depreciated 10% value of first generation assets as the second generation investment value for equity holders. All other second generation capital investments, revenues, expenses, depreciation, and taxes are entered into the net present value cash flow model in exactly the same manner as the first generation model. The capital structure of H2 production and distribution firms is assumed to remain 30% equity and 70% debt. The rate of return on equity remains 10%, the rate of return on debt remains 7%, the income tax rate remains 39%, and the discount rate remains 6%. 

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