Financial Ratio Analysis: What Adobe Gross Profit Margin Tell Investor?

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Adobe stuns us with an 86% gross profit margin – exceeding even Apple, Amazon, Microsoft, and Google. Yet, in a contrast, its operating margin only at a 29% level. In 2019, The creator of Illustrator generates a 9.5 B gross profit margin but only 3.27 B converted as operating margin. The largest cost of software maker is not its software making or research. What does it mean for shareholders? We try to track this financial ratio layer by layer, from revenue to earning, from production to marketing strategy.

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Financial Ratio Analysis: Is ROIC Equal with ROA?

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Charlie Munger has one single – simple, financial ratio for stock market analysis “It’s obvious that if a company generates high returns on capital (ROIC) and reinvests at high returns, it will do well. But this wouldn’t sell books..”. In this article we will discuss:

  1. How ROIC is equal with ROA (Return On Asset)
  2. Why not use ROE (Return on Equity) instead?
  3. In what case ROIC failed?
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