The Margin versus Turnover Trade-
Off
0%
5%
10%
15%
20%
25%
30%
35%
0 1 2 3 4 5 6 7 8 9 10 11
Turnover
Profit Margin
ROE=10%
ROE=20%
Factors Influencing the Margin vs.
Turnover Trade-Off
⚫Lower turnover (and higher margins) result from:
–following a vertical integration versus an outsourcing strategy
Ratio Analysis in eVal
⚫Start eVal
⚫Click ‘View Ratio Analysis’ button
–time-series analysis
Interactive Case: Task 1
⚫Identify an example of an industry that
operates with low turnover ratios and high
Interactive Case: Task 2
⚫Identify an example of a product differentiator
and an example of a cost leader within a
Interactive Case: Task 3
⚫Identify an example of a vertical integrator and
an example of an outsourcer within a particular
reflected in the turnover ratios
Recap
⚫Ratio analysis should take place within a clear decision
context.
⚫Ratio analysis does not provide answers, it just helps
guide your search for answers.