Financial Analysis: Earnings Per Share and Return on Equity - Assignment Example

An increase in EPS indicates the management’s effectiveness,a higher EPS is hence recommended. From the graph, it is evident that EPS has been fluctuating for the 9year period. The worst periods were year 8 and 10 when the EPS was w9-negative and year 9 when it was 0. In years this year, the stockholders view the management as being inefficient, and hence there is much pressure to improve performance. The 7th year had the best performance with the highest EPS of $3; this is followed by the 5th year and the 6th and 13th respectively.

Return on Equity (ROI)-This measure represents the percentage payback received by shareholders on their equity investments in the business. A higher ratio is recommended since it indicates the firm’s ability to raise revenue from the investments. The 7th year had the best performance with approximately 24% return on equity this was followed by the 5th year; the 7th year exceeded the investor’s expectations while the 5th met the investor’s expectations. This is favorable to the stockholders since it implies that for every dollar invested the shareholder received 24 cents.

The worst periods were the 8th, and 10th years with negative ROI meaning the company was operating at a loss, and the 9th year when the ROI was 0. Stock Prices -Stock prices in most cases show the firm’s performance, a method of communicating to the public. The prices are expected to increase as the company grows. From the graph the investors have been expecting the prices to grow, the 5th and 7th years met these expectation while the rest of the years failed to do so. This is a bad image of the company and shows inefficient operations.

In conclusion, the EPS, ROI, and stock prices are necessary tools to indicate on the firm’s performance and management efficiency. It is clear m the analysis that the 7Th year was the best performed followed by the 5th year. Poor performances were in 8th, 9th and 10th years.