Copyright 2000 John F.

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Sample Excel Macros and Applications

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Budgeting Sales Reporting Data Analysis Reporting Financial Statement Presentation Charting Pivot Tables

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Copyright 2000 John F. Lacher CPA

Excel Tip and Example

Title: ROI and ROE Performance Measure

Keywords: Return on Investment, Return on Equity, Goal Seek, Management Performance Description: Worksheet model used to calculate Return on Investment (ROI) and Return on Equity (ROE) that also provides easy methods of changing input values and seeking a final ROE.

Tip:
You can develop a model of your business with an Excel workbook. This model calculates ROE, ROI, profit margin and asset turnover. Once the model is developed, you can try various what if scenarios. You can use Goal Seek functions to solve the model for a desired output (ROE). By adjusting different inputs to the ROE calculation, you can better understand the financial structure and opportunities facing the business. Notes like those inserted in cells N13, N15, Q14 and X18 describe methods of increasing ROE.

Guide to the Example:

Enter starting values in column B. Click the reset buttons to show ROE for the input values. Click on the spinner buttons to change assumptions and use the reset buttons to return to the original values. Enter a desired ROE in cell M4 and click on the Seek button -- choose which input variable you want to change to solve for the desired ROE.

Page 5

ROI_ROE

ROI and ROE Model Summary - XYZ Enterprises

PreTax Margin
19.00%

ROE Goal Seek

Desired ROE 55.00%

Asset Turnover
216.04%

PreTax ROI
41.05%

After Tax ROI

28.73%

After Tax ROE 44.00%

Category

Starting Values

Adjusted Values
Percent Dollar

Cost Of Goods Sold

48.00%

48.00 %

28,417

Total Cost

Selling Expense

32.00%

32.00 %

18,944

47,953

Other Expense

1.00%

1.00 %

592

Pretax Margin

Sales

55,987

100.00 %

59,202

19.00%

PreTax ROI

Asset Turnover

41.05%

Cash

12,456

12,456

2.16

AfterTax ROI

Accounts Receivable

7,689

7,588

Total Assets

Tax Rate

28.73%

Inventories

4,598

4,598

27,403

30.00 %

ROE

Marketable Securities

897

897

44.00%

Other Current Assets

265

262

Land

432

432

Buildings

816

816

Equipment

354

354

Equity Multiplier

1.53

Stockholders' Equity

17,895

17,895