Growth Measure Flashcards
Earning Per Share Growth
Rentention Ratio X ROE
Retention Ratio = % of net income retained by the company = 1 – Payout ratio
Return on Equity = Net Income/ Book Value of Equity
Equity reinvestment Rate
(Net Cap Ex + Change in non-cash WC – Change in Debt)/ (Net Income)
Non-cash ROE
Net Income from non-cash assets/(Book value of equity – Cash)
Net Income from non-cash assets growth
Equity Reinvestment Rate X Non-Cash ROE
Equity reinvestment Rate = (Net Cap Ex + Change in non-cash WC – Change in Debt)/ (Net Income)
Non-cash ROE = Net Income from non-cash assets/ (Book value of equity – Cash)
Operating Income growth
Reinvestment rate x ROIC
Reinvestment Rate = (Net Cap Ex + Change in non-cash WC)/ EBIT(1-T)
Return on Capital or ROIC = EBIT(1-T)/ (Book value of equity + Book value of debt – Cash)
Operating Income Growth when Return on Capital is Changing
ROC t+1 * Reinvestment rate +(ROC t+1 – ROCt) /ROCt
(Capital expenditure −Depreciation +Δ Noncash WC)
/[EBIT(1 −Tax rate)]