Homework: Interpret Research on Decomposition Analysis
Length: 5 to 7 pages.
Research the decomposition analysis of performance ratio and then be able to apply the ratios. You will need to respond to and explain the following:
• Define, describe and illustrate the decomposition of ROI and ROE. Form numerical illustrations to clarify your discussion.
• Extend the basic analysis to show the connection of this decomposition analysis to the common-size income statement. Explain and illustrate clearly the connection and the value of the analysis,
• Using the decomposition of ROI and ROE, form this analysis on a study company and a comparison company using the most recent three years of financial data. Some potential companies could be: Lowes and Home Depot, Toyota and Honda, PepsiCo and Coca Cola. Review the referenced paper by Prendergast (2006). Describe the research question being addressed. Discuss the methods used and the conclusions reached by the study.
Format your homework according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.