How do you interpret the net borrowing rate for the firm

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Reference no: EM13901618

INTERPRETING THE ALTERNATIVE DECOMPOSITION OF ROCE WITH NEGATIVE NET FINANCIAL OBLIGATIONS. Suppose an analyst refor- mulates financial statements to prepare the alternative decomposition of ROCE for a firm with no debt. The analyst determines that the company holds excess cash as large marketable equity securities. The result will be net financial obligations that are negative. Assume that operating ROA is positive and large. How will this affect the decomposition of ROCE = Operating ROA + (Leverage X Spread)? How do you interpret the net borrowing rate for this firm?

Reference no: EM13901618

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