Profit Before Taxes/Net Worth
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Profit Before Taxes/Net Worth
Dictionary Definition
This ratio measures the rate of return on the owners equity. This is expressed as a percentage. It can be used as a measurement of the efficiency of management.
Equation
Why it Matters to You
A high return, normally associated with effective management, could indicate an undercapitalized firm. A low return, usually an indicator of inefficient management performance, could reflect a highly capitalized, conservatively operated business.
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