Page 96 - MA - May 2017

CAPITAL MARKET

Reflection of Firm's Performance through

Return on Equity A study on Sensex Companies

in India

There are various Management Accounting indicators used by the firms to
measure their performance. The important management accounting indicators
are ROE, ROA, ROI, ROS, Cash Conversion cycle, Profit margin, Operating Cycle,
Operating Profit, EPS, Return on Capital employed. This study uses the most
common appropriate accounting-based measure i.e. ROE for assessing the
efficacy of the performance of Sensex companies in terms of profitability

F Objective of Study

To assess the performance of 30 Sensex companies by
using ROE measures
To study the smoothness in the forecasted value of
ROE by comparing with actual ROE

rms Performances states the subjective
Acheampong (2000) the ROE has a great influence on
overview of how well a firm uses its assets that support Literature Review on Roe
the company and country performances.
for revenue generation. In this paper, 30 component Herciu, Ogrean and Belascu (2011), Investors are
companies which are some of the largest and most least concern for any other profits they prefer to check
actively traded stocks in BSE are taken. These 30 on ROS, ROS and ROE, to know the cause and effect
companies are representative of various Industrial relationship i.e. cause may be sale, assets or Equity and
sectors of the Indian economy. Accounting profitability effect is profit.
of the companies can be measured with four indicators (Berman, Knight and Case, 2013) ROE says about the
such as ROE, ROA, ROS and ROI. Out of these four most company’s profitability that earned from shareholder’s
extensively used accounting measures we have taken investment, but it depends on the company to distribute
ROE is an appropriate measure or reinvest Aimen Ghaffar
to reflect the firm’s performance. (2014) ROE has a positive
effect on the profitability and
organisational performance

CMA Dr. Prafulla Kumar Swain Arya Kumar
Professor Research Scholar
IBCS, Siksha ‘O’ Anusandhan IBCS, Siksha ‘O’ Anusandhan
University University

96 The Management Accountant l May 2017 www.icmai.in