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A Better Way to Gauge Profitability
EXECUTIVE SUMMARY Return-on-equity (ROE) is the correct profit metric to evaluate the performance of a business. However, the primary emphasis on financial ratio analysis must be on operating performance. The “advanced” version of the DuPont model remedies the original model’s failure to cleanly separate the effects of operating and financing...
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| Exhibit 7: Rules of Thumb—When to Do What |
| When to Buy | When to Lease | | Purchaser pays cash rather than financing. | Lessee wants lower monthly payments. | | Purchaser plans to hold auto for more than four years. | Lessee plans frequent trade-ins. | | Auto weighs more than 6,000 lbs. | Auto weighs less than 6,000 lbs. and costs more than $15,300. | | Purchaser plans high mileage usage (more than 18,000 miles/year). | Lessee plans low mileage usage (less than 15,000 miles/year). | |