Accounting - Topics - Understanding and using accounting information -
Is relevant as the denominator of ROI. (return on owner's investment)
OE (owner's equity) is the residual value of assets minus liabilities. If
excess assets are carried by the business then OE is excessive and the
return on investment is diminished. To reduce OE the owner may dispose of
excess assets and take the excess funds out of the business and invest
elsewhere. Alternatively new, more productive assets may be acquired.
By diminishing the number of unnecessary assets the sales/assets ratio
will also be improved.
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