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Essay / Research Paper Abstract
This 3-page paper explains return on equity and internal rate of return. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: AS43_MTroeirran.doc
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Unformatted sample text from the term paper:
ARs (accounts receivables); when focused on how much is being borrowed versus how much money is being raised, companies examine a D/E (or debt-to-equity ratio) and in analyzing how much
money is being earned versus how much stock is outstanding, the analysis turns to EPS, or earnings per share. The two "bits" of
the alphabet were focused on in this paper is ROE (return on equity) and IRR (internal rate of return). ROE examines an organizations profitability by indicating how much profit a
company generates through shareholder investment (Return on Equity, 2011). Its shown as the amount of net income that is returned as a percentage of shareholder equity (Return on Equity, 2011).
Along those lines, the ROE is calculated by dividing a companys net income by its shareholder equity (Return on Equity, 2011). ROE is also helpful when it comes to comparing
the profitability of companies in the same industry. How does the ROE compare with return on capital (ROC)? While both of these
involve similar measurements and concepts (they both determine a firms profitability based on the liquidity it has), return on capital adds the total value of debts in the form of
loans and bonds the company has (What is the difference, 2011). ROE, as we saw from the equation above, doesnt throw debt into the pot.
In the meantime, Internal Rate of Return (IRR) is the rate of growth that a particular project, or investment, is anticipated to generate (Internal Rate of Return, 2011).
Generally, the higher a particular investment or projects IRR, the more attractive it is to undertake (Internal Rate of Return, 2011). IRRs are typically used to determine where capital should
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