Analyze any apparent trends in the ratios: Decomposition of ROE - IBM ROE Net pr

Question

Analyze any apparent trends in the ratios:
Decomposition of ROE - IBM ROE Net profit Pretax profit EBIT Sales Assets Pretax profit EBIT Sales Assets Equity 2014 1.001 0.740 0.971 0.477 0.298 9.783 2013 0.719 0.831 0.980 0.524 0.306 5.505 2012 0.875 0.750 0.980 0.546 0.347 6.280 Analyze any apparent trends in the ratios:
Decomposition of ROE - IBM ROE Net profit Pretax profit EBIT Sales Assets Pretax profit EBIT Sales Assets Equity 2014 1.001 0.740 0.971 0.477 0.298 9.783 2013 0.719 0.831 0.980 0.524 0.306 5.505 2012 0.875 0.750 0.980 0.546 0.347 6.280

Explanation / Answer

ROE in 2013 has reduced compared to 2012 as the Percentage of assets to equity is reduced.

Net profit to pretax profit is reduced in the year 2014 as the income tax rates might be increased in 2014.

Pretax profit to EBIT is reduced in the year 2014 as there may be increase in the interest expense for the year.

Assets to Equity is increased in the year 2014 as the assets portion is increased when compared to the equity.

As the assets portion is increased in the year 2014, the net sales to the assets in the year 2014 is also decreased to that effect.

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