Profit before tax/average net fixed assets. The higher this ratio is, the better. A company should earn more on its tangible assets (as well as tangible equity and capital employed) than the bank’s fixed deposit rate. Pretax return on tangible equity. The higher the pretax return is, the better. Tangible equity is calculated by subtracting intangible assets and preferred equity from the company’s book value. Be cautious of companies for which the high return on equity figure is being primarily driven by higher leverage. Return on capital employed. The higher this return is, the better. This is
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