Ahrenl
join:2004-10-26
North Andover, MA
 ·Verizon FIOS
| reply to TKJunkMail
Re: The real answer is...Yes...and No
As a good measure of a company, but not measure of return. The return to investors generated by the company is the ROE. ROA intermixes the return on assets that may have been generated by debt issuance, retained earnings, or, ahem, legislative handouts. Of course your nominal ROA on free assets will be lower, as they cost you nothing and distorted your NPV/IRR decision process.
Btw, welcome back from the "ignore posts" limbo... |
|
TKJunkMail
Enjoy the sun
Premium
join:2002-03-03
Avalon, NJ
 ·Sprint Mobile Broa..
 ·Comcast
| reply to Ahrenl
said by Ahrenl  :ROA is the wrong measure for "Investors" You want to use ROE. Especially for large leveraged companies ROA will ALWAYS be tiny, because your denominator will be so large. Examples: ComcastReturn on assets 2.37% Return on Com Eqty 6.22%VerizonReturn on assets 3.47% Return on Com Eqty 14.05%AT&TReturn on assets 3.53% Return on Com Eqty 8.64% ROE is a good measure for Qtrly and Yearly measures and for investors that get in and out of the market based on stock price and projected earnings. ROA is a much better measure of a company's long term viability and its ability to cover the cost of capital and return consistent dividends. Both measures have their value. Institutional investors(pension funds especially) that look for good companies for long term investing consider ROA as a key measure.
--
--
My BLOG
My Web Page |
|
Ahrenl
join:2004-10-26
North Andover, MA
·Verizon FIOS
| reply to HyPeRbAnD
ROA is the wrong measure for "Investors"
You want to use ROE. Especially for large leveraged companies ROA will ALWAYS be tiny, because your denominator will be so large.
Examples:
Comcast
Return on assets 2.37%
Return on Com Eqty 6.22%
Verizon
Return on assets 3.47%
Return on Com Eqty 14.05%
AT&T
Return on assets 3.53%
Return on Com Eqty 8.64% |
|
HyPeRbAnD
join:2006-01-07
Stow, MA
| reply to TKJunkMail
said by TKJunkMail :said by nasadude :you know, programming is one of the issues in pricing, but the cable and telcos could also take a smaller profit and lower prices. These industries - telecommunications(includes cable) and entertainment barely make a return on assets that is above what people can get with savings bonds. They can't LOWER prices without going out of business due to lack of investors. The ignorance of people on these forums about the financial aspects of business is truly appalling. ROA by Industry » money.cnn.com/magazines/fortune/···dex.htmlROA by company in telecommunications » money.cnn.com/magazines/fortune/···s/2.htmlROA by company in entertainment » money.cnn.com/magazines/fortune/···t/2.htmlIf investors can't get a return on their investment money, the money goes elsewhere. You took the word right out of my mouth...
Anyway we complain about prices, we should look at Exxon Mobil and their profit. Lower the damn gas prices and we will have more to spend on entertainment. |
|
