Are the firm’s managers generating adequate operating profits on the company’s assets? How are the firms financing their assets?

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In order to determine whether a firm’s managers are generating adequate operating profits on the company’s assets, one must first calculate its return on assets (ROA). This can be done by dividing the net income by total asset value. If this number is below the industry average then it could indicate that the company’s management is not effectively utilizing its resources which would suggest room for improvement in terms of efficiency.

The second part of the question relates to how firms finance their assets. Generally, companies use either debt (borrowing from lenders) or equity (investments from shareholders) as sources of capital. The mix between these two will depend on a variety of factors such as risk tolerance and expected returns but both have associated costs that need to be considered when making any financial decisions.