Though widely used, the ROA is an odd measure because its numerator measures the return to shareholders (equity and preference) whereas its denominator represents the contribution of all the investors (shareholders as well as lenders).
Tesco’s ROA has been 0.07% in 2005, 0.07% in 2006, 0.08% in 2007, 0.07% in 2008 and 0.05% in 2009. This shows that the return to shareholders has increased over the years 2009 is showing the lowest ratio which shows that the excellent financial performance of the organization has led to an increased dividend this year. Return on Equity is the return on net worth. This is the return to shareholders and it’s important for investors. The ROE for Tesco has been 0.16% in 2005, 0.17 in 2006, 0.18% in 2007, again 0.18% in 2008 and in 2009 it has fallen to 0.17%. This good and the company has been issuing dividends the ROE is good and this company is not suitable for small and medium term investors.
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