Analyzing Performance

Question 1

Decomposed ROIC

Answer 1

The preceding equation is one of the most powerful equations in financial analysis. It demonstrates the extent to which a company’s ROIC is driven by its ability to maximize profitability (EBITA divided by revenues, or the operating margin), optimize capital turnover (measured by revenues over invested capital), or minimize operating taxes.

Question 2

Operating Margin

Answer 2

EBITA / REVENUES