article thumbnail

How To Really Measure a Company's Innovation Prowess

Harvard Business Review

So it began disaggregating return on equity into three components. Return on equity (net income divided by equity) results from multiplying three key operating ratios: Profitability (net income over sales). Operating efficiency (sales over assets). Financial leverage (assets over equity).

article thumbnail

How To Really Measure a Company's Innovation Prowess

Harvard Business Review

So it began disaggregating return on equity into three components. Return on equity (net income divided by equity) results from multiplying three key operating ratios: Profitability (net income over sales). Operating efficiency (sales over assets). Financial leverage (assets over equity).