Hi,
I don’t understand how we can get the ROE from this table. It should be NI/E but I don’t get the working here. Answer should be 15,39%.
Why do we take ni*int burdern*ebit margin*TATO*LR?
This comes from Dupont Analysis
ROE = Net MArgin x Asset Turnover x Financial Leverage
We can furer breakdown NetMargin by
NM = EBIT margin x interest burden x tax burden
or
NM = EBIT margin x interest burden x (1 - tax rate)
PS always good form to publish questions and answers.
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ok
Aha alright cool. It feels hard to remember so many concepts but I guess I have to some days before the exam to just review all notes and try to really understand the concept while studying now a few months ahead.
Isn’t the interest burden should reduce from EBIT ? Here you multiplied it. Please correct me.