49% which shows that the company is able to earn $22 by investing $100 which is certainly a sign of financial healthy company. After analyzing the profitability ratio, let's now examine the efficiency ratios of the company.
Efficiency Ratio Analysis
Efficiency ratios (ER) are the ratios which used to assess the effectiveness of a company. The specific rations come under the ambit of ER are Return on Asset (ROA) and Return on Equity (ROE) (Daniel, 1992). Let's examine both the ratios.
Return on Assets (ROA) Analysis
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how helpful management is at using its assets to produce profit (Groves & Edward, 2004). Calculated by dividing a company's annual wages by its total assets, ROA is displayed as a percentage. The computed ROA figure and its graph is mentioned below,
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