Measure how well a company is performing relative to its overall profitability goals Quizlet

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=NI/EBTEBT/EBITEBIT/Rev.
ROE = Tax burden × Interest burden × EBIT margin × TA turnover × Leverage
-Tax burden measures the effect of taxes on ROE- reflects 1- avg. tax rate, how much pretax profits it keeps-decimal or % form-Higher -higher pretax profits, lower tax rate-Lower -higher tax rate, lesser pretax profits
-interest burden-higher borrowing costs reduce ROE-some use op. income instead of EBIT -in such a case, it would measure both the effect of interest exp. & non-op. income on ROE.
-EBIT margin- the effect of operating margin or EBIT margin on ROE - measures the effect of operating profitability on ROE.
-total asset turnover ratio, - efficiency of the company
- leverage ratio - financing activity/solvency
-dupont analysis expresses a company's ROE as a function of its tax rate, interest burden, operating profitability, efficiency, and leverage -useful in forecasting ROE based upon expected efficiency, profitability, financing activities, and tax rates.

-effect of the co. sec whose conversion or exercise results in a reduction of basic EPS; potential ordinary shares are dilutive when their conversion would decrease net profit per share from continuing ordinary operations.
-include convertible debt, convertible preferred, warrants, and options, contingently issuable shares, contracts that can be settled in ordinary shares or cash, purchased options, and written put options.
-both basic & diluted EPS shown on face of IS for each class of ordinary share. - disclosure includes AMT. used as the num. in calculating basic and diluted EPS, and a reconciliation of those amt. to the Co. profit/loss for the period.
-for diluted EPS, earnings are adjusted for the after-tax effects assuming conversion i)the weighted average number of shares for basic EPS, plus those that would be issued on conversion of all dilutive potential ordinary shares calculated.

-meeting with management, including CFO, to discuss, industry outlook, overview of major business segments, financial policies and goals, distinctive accounting practices, capital spending plans, and financial contingency plans.
-Tours of major facilities, time permitting.
-Meeting of a ratings committee where analyst's recommendations are voted on, after considering factors like: i)Business risk, including -■ operating environment; ■industry characteristics - cyclicality and capital intensity ■success factors and areas of vulnerability; ■company's competitive position, including size and diversification.
ii)Financial risk, including:■ the evaluation of capital structure, interest coverage, and profitability using ratio analysis, and ■ the examination of debt covenants.
iii)Evaluation of management.
-Monitoring of publicly distributed ratings-including reconsideration of ratings due to changing conditions.