... $85, which grew from around $25 in 1986. But the book value of equity is based on the amount of money raised from issuing stocks over the period from 1986 to 1999. This is a likely cause for the difference between the two equities. Also, in general, ROCE is a measure of the rate that common shareholders are earning on their shares. Companies that generate high returns relative to their shareholder's equity are companies that create substantial assets for each dollar invested. These businesses are more than likely self-funding companies that require no additional debt or equity investments. A look at the ROCE for Microsoft over the period, (6.Appendix), suggests that the company is highly capable of generating profits. Another indicator of ability of producing high profit margins is the Asset Turnover. This ratio has been consistently low (and fell from 0.82 in 1997 to 0.53 in 1999) over the ...

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