mjs 99

docx

School

University of Phoenix *

*We aren’t endorsed by this school

Course

571

Subject

Finance

Date

Feb 20, 2024

Type

docx

Pages

1

Uploaded by BailiffInternetRat32

Report
Thanks for the good post, Mallory, and as you think about the company you are studying, would it be better to use the ROA to analyze the company, or would ROE (the ratio we looked at in Week 2) be a better measure? When analyzing a company like Walmart, both (ROA) and (ROE) can provide different insights that would show the performance of the company, but they do show different aspects of Walmart’s financial health. ROA will measure how Walmart is utilizing the assets to create a profit. ROE will measure Walmart’s profitability relative to the shareholders equity. This method shows how much profit Walmart generates with the money that the shareholders have invested. I believe ROA would be the better measure. Walmart relies heavily on asset infrastructure, such as stores, and inventory. ROE would be more appropriate to determine shareholder equity and returns. In order to determine the asset efficiency, ROE will be the best choice. **Choosing Between ROA and ROE for Walmart:** - If you want to assess how effectively Walmart is using its total asset base to generate profits, **ROA** would be a better measure. This is important because Walmart relies heavily on its extensive asset infrastructure, such as stores, distribution centers, and inventory, to drive its profitability. - However, if you are more concerned about how well Walmart is utilizing shareholder equity to generate returns, then **ROE** would be more appropriate. This is particularly relevant if you are interested in understanding the profitability of Walmart from the perspective of its shareholders. **Conclusion:** Both ROA and ROE offer valuable insights into Walmart's financial performance, but the choice between them depends on the specific aspect of the company's performance you want to analyze—asset efficiency or shareholder returns.
Discover more documents: Sign up today!
Unlock a world of knowledge! Explore tailored content for a richer learning experience. Here's what you'll get:
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help