Read the formula and its variables
Intermediate quantities must use the same amounts in matching factors.
| Input | Meaning |
|---|---|
| NI/S | Net margin |
| S/A | Asset turnover |
| A/E | Equity multiplier |
Inspect a stated example
6.3% × (3,000/2,100) × 3 gives 27% before intermediate rounding.
The illustrative inputs are not an actual issuer’s data. Match balance coverage, flow period and units before applying the formula.
Keep the conclusion within the evidence
The identity reconstructs a quotient. Causes and persistence require additional evidence.
A ratio change can motivate a further question. It does not automatically identify the transaction, risk or operational outcome that produced it.