ROA Discussion 2

Continuing from the last video on ROA, Sal further explains his choice of using EBIT to calculate return on assets. He uses two sample companies to illustrate this concept, giving each the same amount of assets. First, he calculates ROA based on EBIT or operating profit, explaining how this shows which company manages their assets most effectively. Next, he calculates using net income, showing scholars the effect of ROA based on a company's taxes and debt. He depicts this percentage as a "superficial" assessment, whereas using EBIT is an "intuitive" look at how a company manages assets.

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