Question
In 2005 IBM had an ROE of 26.7%, but Hewlett-Packards ROE was only 6.4%. Use the DuPont framework to identify possible reasons for this difference
In 2005 IBM had an ROE of 26.7%, but Hewlett-Packard’s ROE was only 6.4%. Use the DuPont framework to identify possible reasons for this difference based on the data below:
IBM | HP | |
| NOPAT/Sales | 9.0% | 2.7% |
| Sales/Net Assets | 2.16 | 2.73 |
| Effective After-Tax Interest Rate | 2.4% | 1.1% |
| Net Financial Leverage | 0.42 | -0.16 |
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Business Analysis Valuation Using Financial Statements
Authors: Paul M. Healy
5th edition
1111972303, 978-1111972301
