Return on Equity-Free-Samples for Students-Myassignmenthelp.com

Question: Discuss abou the Return on equity. Answer: Introduction To ascertain the financial position of a business concern the things that is to be known or calculated more certainly is the ROE or the company which is also known as the Returns on equity. After analyzing the balance sheet of 5 different companies and doing certain calculation based on the formulae of ROE some conclusions are done which ascertains the financial positions of the 5 companies whose balance sheets are being analyzed (Elzinga et al.2015). Discussion As per the 1994 balance sheet of Boston Beer Company, Anheuser Company and Coors Company the sales are $ 128077, $13733 and $2040330 respectively and their net income are $9085, $1707 and $104220. These values are the requirement to find out the returns on equity (ROE). The formula used for ROE is: Net income/ Average of shareholders security. The companies average share holders security are $7727, $7488 and $653064 respectively. On calculating keeping the above formula in mind it is seen that the Boston Beer Company has the highest ROE in comparison to all 5 companies whose datas are being analyzed. The ROE structure of all 5 companies according to the comparison are as follows: The Petes company ROE is 71.57 The Redhook Companys ROE is 15.75 The Boston Beer Companys ROE is 117.57 The Anheuser Company Has its ROE to be 22.80 The Coors Companys ROE is15.96 From the above derivation which is made from the balance sheets of all five companies it is well understood that Boston Beer Company has the highest ROE in comparison to the others. That means that its utilization of equity in making income out of that is highest from the other companies, thus showing a very good amount of stability in financial condition (Malone and Jayson 2017). The reasons behind Boston BEER Company having the highest ROE with comparison to the other companies are: The ratio between the amounts of equity share capital and the amount of money that is funded from other sources and used as capital for the organization is much consistent than the other companies. The Companies Profitability in comparison to the capital employed is much more than the other companies is high thus it has a promising high rate of returns on equity thus granting a stable financial condition (Neil et al.2014). The EBT per sales ratio is 7.09 which is a consistent rate of return contributing to high Returns on Equity. Which shows that the company pay a good amount of tax making the income before taxes much higher than that of income after paying taxes. The ratio between the sales and the assets of the company is 4.59 this shows that the company is stable and has a good financial structure which is good and helps in increasing the ROE (Amaya et al.2015 ). The ratio of the assets towards the equity share capital or the average equity share capital that has been funded for the company is 3.61. Which means that the company has kept a good ratio between equity share capitals as well as its assets showing the companies stability and increasing the returns on equity. Conclusion It can be concluded that the Boston Beer Company is at a position at which the company has a good financially stability which shows that the company is Goal oriented and capable of managing the firm without incurring losses or excess liabilities which is not good for the company. References Amaya, Diego, Peter Christoffersen, Kris Jacobs, and Aurelio Vasquez. "Does realized skewness predict the cross-section of equity returns?."Journal of Financial Economics118, no. 1 (2015): 135-167 Elzinga, Kenneth G., Carol Horton Tremblay, and Victor J. Tremblay. "Craft beer in the United States: History, numbers, and geography."Journal of Wine Economics10, no. 3 (2015): 242-274. Malone, Trey, and Jayson L. Lusk. "If you brew it, who will come? Market segments in the US beer market."Agribusiness(2017). Neil, Ralph B. "From yellow fizz to big biz: American craft beer comes of age."Focus on Geography57, no. 3 (2014): 114-125.