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Management Efficiency Ratios

A strong management team is one of the key elements for a good company other than corporate business model, products and services etc...

ROI and ROE are the management efficiency ratios use to measure how much earnings a company extracts from its resources or assets.

Return On Investment (ROI)

Return on investment ROI also known as return on assets ROA.

Return on Investment ROI = Net Income / Total Assets

Beside ROI, investors should look the the assets used to generated the return whether is bought or leased. Lease assets can generate high ROI but cost more to the company in the long run than to own them.


 

Return on Equity (ROE )

Return on Equity ROE is Rate of return of the stockholders' investment.

Return on Equity ROE = Net Income / Stockholders' Equity

 
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