BV of Debt + BV of Equity

Decomposing Return on Capital

The return on capital of a firm can be written as a function of its operating profit margin and its capital turnover ratio.

BV of Capital Sales BV of Capital

= After - Tax Operating Margin * Capital Turnover Ratio

Pre - Tax ROC = Pre - Tax Operating Margin * Capital Turnover Ratio

Thus, a firm can arrive at a high ROC by either increasing its profit margin or more efficiently utilizing its capital to increase sales. There are likely to be competitive constraints and technological constraints on increasing sales, but firms still have some freedom within these constraints to choose the mix of profit margin and capital turnover that maximizes their ROC. The return on capital varies widely across firms in different businesses, largely as a consequence of differences in profit margins and capital turnover ratios.

Retirement Planning For The Golden Years

Retirement Planning For The Golden Years

If mutual funds seem boring to you, there are other higher risk investment opportunities in the form of stocks. I seriously recommend studying the market carefully and completely before making the leap into stock trading but this can be quite the short-term quick profit rush that you are looking for if you am willing to risk your retirement investment for the sake of increasing your net worth. If you do choose to invest in the stock market please take the time to learn the proper procedures, the risks, and the process before diving in. If you have a financial planner and you definitely should then he or she may prove to be an exceptional resource when it comes to the practice of 'playing' the stock market.

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