This year andrews achieved an roe of 13.9%. suppose management takes measures that increase asset turnover (sales/total assets) next year. assuming sales, profits, and financial leverage remain the same, what effect would you expect this action to have on andrews's roe?

Question

Zion Harper

Business

28 April, 03:40

This year andrews achieved an roe of 13.9%. suppose management takes measures that increase asset turnover (sales/total assets) next year. assuming sales, profits, and financial leverage remain the same, what effect would you expect this action to have on andrews's roe?

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Deven Perry · Answer 1

The effect of Andrew's roe when the management will calculate all possibilities that increase asset turnover (sales/total assets) next year and that assuming sales, profits, and financial leverage remain the same is that his roe will decrease. This is because of inflation, goods and products prices' increases overtime and no matter how your percentage is at the moment (high or low) if things are the same and no change is done to counteract it, your stocks will certainly decrease.