Compare your approaches to other students’ responses. How were they similar or different? Why might you use the different approaches shared by your classmates?
Write a response to the following in a minimum of 500 words:
You are writing a book on how to evaluate performance evaluation for a company. Think about some of the influences and measures of company performance that you read about in this module.
Explain the use of return on assets (ROA) and the price-to-earnings (PE) ratio in evaluating the performance of a company. Write about how to calculate ROA and PE ratio and how market conditions can affect these metrics.
Share the ROA and PE ratio for a company you are familiar with. What do these metrics tell you about the financial health of the company?
Submit your assignment.
Answer preview
Return on Asset (ROA) is one of the financial performance evaluations that investors, managers, or analysts use to assess how efficient a company’s management team is at utilizing its assets to generate revenue or earnings (Atidhira & Yustina, 2017). ROA ratio is displayed as a percentage, and the higher the percentage, the more efficient the management team in utilizing the assets of a company in generating earnings. It also shows that the company is earning more income from less investment. Return on Asset tells the management or investors the specific earnings that were generated from an invested asset. The ROA percentage calculated can be compared to the previously calculated rates or with similar companies’ ROA to gauge the financial performance progress of a company.
