Return on equity is one of the most important ratios used to analyze the performance of the company. Investors and management of the company use returns on equity to analyze the performance and profitability of the company. DuPont ratio analysis is used to decompose the returns on equity of both the companies. By decomposing different elements that influence the returns on equity of companies, this report identifies important areas that help in increasing or decreasing the returns on equity. There are different elements that influence the returns on equity and some of these elements are Tax Burden, Interest Burden, Operating Margin, Asset Turnover and Leverage Ratios. DuPont analysis is applied on the two companies under study; Apple and BlackBerry, but this report also uses the data of other industry important players to analyze the factors that influence the ROE of the company. Industry players that are used in this report are Motorola Solutions, Inc. (MSI) -NYSE, Nokia Corporation (NOK) -NYSE, Microsoft Corporation (MSFT) -NasdaqGS, Hewlett-Packard Company (HPQ) -NYSE, International Business Machines Corporation (IBM) -NYSE).
It has been found that Apple has performed the better when compared with Blackberry and average of the industry as ROE of the company has been higher than Blackberry as well as higher than Industry averages. Moreover, it has been found that the returns on equity of Apple have been showing an increasing trend in the last five years whereas the returns on equity of Blackberry have been showing a declining trend. In the years 2008 and 2009, ROE of blackberry was higher than Apple but the ratio was more or less the same in the year 2010. However the returns of Apple kept on increasing and these returns exceeded the returns of Blackberry. Therefore ROE of Apple was higher than ROE of Blackberry in 2011 and 2012.
Moody’s Bond Rating criteria are also used to analyze