Evaluating Performance DB Essay Example | Topics and Well Written Essays - 750 words

Evaluating Performance DB - Essay Example The formula to calculate return of equity is net income divided by stockholders equity. An investor evaluating return on equity is looking for a highest return on equity possible. In order to determine if the return on equity of a company or project is good an analyst must compare the company’s return on equity with the industry standard. A good source to find information about the financial metric industry standard is Dun & Bradstreet database. Utilizing return of equity to evaluate oversee projects has its advantages and disadvantages. Return on equity is good performance metric because it is very straight forward as far as being an indicator that can be used to compare between different projects. It is a metric that can be easily calculated by looking at a company’s financial statements. This financial ratio allows an investor to determine the overall efficiency of the company or project being evaluated. Some of the drawbacks associated with utilizing return of equity to evaluate an oversee project is that the formula to calculate the ratio relies on the validity of the financial information provided to the investor. In certain foreign nations corruption is big part of corporate business, thus tricks such as write downs can distort the numbers. A factor that can lead to misinterpretation of data when evaluating the return on equity metric in the international scene is inflation. Internal rate of return is a financial metric that provides insight regarding if a project is worth investing on or not. The metric helps an evaluator of a project determine the overall quality and efficiency of the investment. In essence the metric provides a person with information about the expected growth of a project which is valuable information for company such as Acme which wants to determine whether a foreign investment is worthwhile. There are pro and cons associated with the application or utilization of IRR in an international setting. One of the key advantages of