Appendix A Summary

Appendix A focuses on financial performance measures and their calculations using Standard and Poor's Compustat data. The appendix provides a comprehensive overview of various financial ratios and metrics used to assess a company's performance.

The document covers several categories of financial measures, including profitability measures (such as profit margin, operating margin, and return on assets), efficiency measures (like total asset turnover and inventory turnover), cost measures, working capital efficiency ratios, and Tobin's q. For each measure, it provides detailed formulas and explanations using Compustat codes for specific financial statement items.

The appendix also includes a section on DuPont analysis, which breaks down return on assets (ROA) and return on equity (ROE) into their component parts. It provides examples of how DuPont analysis can be applied to diagnose changes in a company's financial performance and to understand how different business strategies (such as product differentiation vs. cost leadership) are reflected in financial ratios. The document concludes with a comparison of financial ratios between Apple and Dell to illustrate how these measures can reveal differences in business strategies.