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Essay / Influence of Return on Assets ROA Ratio - 1302
Stocks are one of the best tools ever invented for creating wealth. But along with the possibility of winning, there is a great possibility of losing. The only thing that can protect against a loss is knowledge of stock price movements. Unfortunately, there is no clear equation that can tell us exactly how a stock's price will perform, but we can try to find certain factors that cause stock prices to rise or fall. If we look at stock prices, we can see that for large, well-known companies, stock prices are very high, while for small companies they are much lower. This means that one of the factors that determines stock prices is the financial condition of the company. We assume that analyzing the company's annual report data can help us better understand the connection between the company's financial situation and the change in the company's financial situation. the share price. In this article, we will compare the movement of the return on assets ratio (ROA) and stock prices. Problem Formulation In the analysis part of the project, we will try to answer the following two questions: How is ROA related to stock prices? How can change in ROA affect stock prices?Concepts and definitionsStocks represent a claim (dividends) on a portion of the company's profits.Stock price is the price of a single share of a company. They change every day based on market forces. By this we mean that stock prices change due to supply and demand. If more people want to buy a stock rather than sell it, the price increases. Conversely, if more people want to sell a stock than buy it, the price will fall. Financial statements are official documents about a company's financial activities. These statements provide insight into a company's financial position in the short and long term. “The objective of financial statements is to provide information about the financial strength, performance and developments in the financial position of an enterprise that is useful to a wide range of users in making economic decisions. » Financial ratios are ratios of selected values in a company's financial statements. They are useful for comparing and investigating relationships between different financial information. Using ratios eliminates the size problem because size actually divides. There are several groups of financial ratios: liquidity ratios, financial leverage ratios, turnover ratios, profitability ratios and market value ratios...