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Abstract - Quest for Global Competitiveness - Universidad de Puerto ...

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12Besi<strong>de</strong>s AGP, there are 15 additional categorical variables <strong>for</strong> industry sectors –motor vehicles and car bodies (MVCB), air transportation (AT), medicinal and botanicals(MB), computer programming (CP), tires and inner tubes (TIT), cement, hydraulic (CH),petroleum and natural gas (PNG), electric services (ES), electronic components (EC),commercial banks (CB), meat packing plants (MPP), pulp mills (PM), biological products(BP), television broadcasting (TB), and iron ores (IO) – and 7 <strong>for</strong> world regions –Europe, Asia, North America, Latin America, Oceania, Caribbean, and Africa.The per<strong>for</strong>mance measures are three profitability ratios – return on assets(ROA), return on equity (ROE), and return on investment (ROI). Profitability ratiosassess a company‟s ability to incur expenses <strong>for</strong> amounts lesser than total revenues, inor<strong>de</strong>r to achieve a positive net income. Mergent Online <strong>de</strong>fines these variables asfollows.1. Return on Equity (%) (ROE) =(Income from continuing operations / Stockhol<strong>de</strong>rs' equity (or Total partnership capital) x1002. Return on Assets (%) (ROA) =(Income from continuing operations / Total assets) x 1003. Return on Investment (ROI) =(Income from continuing operations / (Common stock + Preferred stock + Long-term<strong>de</strong>bt)) x 100All three measures relate income from continuing operations to investmentmeasures. Return on equity focuses on investments ma<strong>de</strong> by owners (stockhol<strong>de</strong>rs orpartners) through their contributed capital and additional increases to equity or capital.Return on assets‟ emphasis is on investments by a company to acquire assets <strong>for</strong> theiroperations. Return on investment consi<strong>de</strong>rs the investment ma<strong>de</strong> by major provi<strong>de</strong>rs oflong term financing sources – contributed capital from common and preferredstockhol<strong>de</strong>rs and long-term <strong>de</strong>bt owed to len<strong>de</strong>rs.Other measures serve as control variables. There are two <strong>de</strong>bt managementmeasures – total <strong>de</strong>bt to equity (TDE) and long-term <strong>de</strong>bt to equity (LTA). The <strong>de</strong>finition<strong>for</strong> total <strong>de</strong>bt to equity is presented below.

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