The Fundamental Analysis Scheme for Profitability

Chapter 7 takes you through the fundamental analysis scheme to get to the granular drivers of residual operating income. The scheme breaks down RNOA and growth in net operating assets into subdrivers. Here is a depiction of the analysis of profitability that starts with levered profitability, ROE rather than RNOA. It includes an analysis of the leverage effect on ROE to add to the analysis of RNOA.