Return on Equity (ROE), Return on Capital Employed (ROCE), Economic Profit (EP) and Economic Value Added (EVA) (Presentation Slides)

Abstract

This paper includes the following topics: 1. The Return On Equity (ROE): What is ROE? How do we know if the ROE of a company is good or not? What should be the relationship between ROE and cost of equity(Ke)? What are the ROEs of the different industries? 2. The Return On Capital Employed (ROCE): What is ROCE? The ROCEs of different industries 3. The relationship between ROE and ROCE and the effect of debt. When the use of debt improves ROE? 4. The ROCE depends on operating margin and turnover of capital employed. Therefore, how the ROCE can be improved? 5. The ROE depends on ROCE and debt level. Therefore, how the ROE can be improved? 6. The ROE depends on net profit margin, turnover of CE and financial leverage. When financial leverage improves the ROE? 7. The ROE vs. Ke and ROCE vs. WACC. What relationship should be between ROE and Ke? What is the WACC? What relationship should be between ROCE and WACC? The ROE vs Ke and ROCE vs WACC of the different industries 8. The Economic Profit (EP) and the Economic Value Added (EVA). What is the EP and what does it indicate? What is EVA an what does it indicate? 9. How to estimate the cost of equity (Ke): the Capital Asset Pricing Model (CAPM). What is the CAPM and how to estimate Ke using it. What are the problems of the CAPM? 10. Practice questions Multiple exercises with real companies like Apple, Amazon, Microsoft, Google, Bayer, Mazda and Orange are included.