The Return on Equity - Case Study Example

The article emphasized the financial health checking ratios, whereas the rigorous research and model analysis, ROE has been established as a benchmark of analysis. With industry analysis, we have estimated a few companies' ROE that are performing significantly for a long time. For example: On the scale of ROE (Return on Equity) GSK (GlaxoSmithKline) presents .46, .45, NOVARTIS presents .151, .140 and Abbott presents .203, .198 for the consecutive years 2010 and 2011. In this comparative positioning among the competitor, Abbott can sustain with ROE, which will eventually protect assets and efficiency improvement in the long run. With the global recession, this ROE ratio appears a slowdown in recent years, which is accurate in comparison to other ratios like ROA, which came across the result as the recent years are higher than previous, this presents a short-term effect on business operations than a long-term picture of existing activities.

For a manufacturing company, the model we can get most viable to implement is “Reduce operating expenses and staff salaries”. In a recent competition, the price of the products is increasing due to different raw materials and fuel price increases, besides these when operating and staff salaries become good amount product price gets uncontrollable and the business may lose its market for a high price. Under these conditions implementing a commission-based model would be a bigger save for the manufacturing companies for long-term sustenance, in terms of price control. Commission-based activities and full-time urgent functionalities have to be separated to identify the weight of the assignment or the internal task. There are some sorts of activities that can be best performed on a task performance commission basis, instead of continuous salary whether there is sufficient need for a particular skill or not. For example, the machine operator of the core item needs to be employed on a salary basis, but the market seller, as well as product design and development research activities, has to be commissioned based on a specific amount to complete the task with competency. Functional separation for this method implementation would be a crucial point of strategy formulation for manufacturing companies. Read More