1) Break down Alcoa's ROE by quarter for 2006 and 2007. In which direction do you see the company's performance moving? What other information would you like to see (be specific)? Answer: ROE is the return on equity determined using the formula of net income divided by total equity. This calculation is essential to understanding whether there is an improvement or decrease in return on investment for common shareholders. In this case, it is clear from the following calculation that there is only a slight improvement in ROE for 2007 compared to the 2006 ROE calculation: (in millions of dollars) 2006 2007 Consolidated Net Income I $2,248 $2,564 Total Equity II $14,631 $16,061 ROE III =I/II 15.36% 15.96%ROE broken down:ROE = Net Profit Margin*Asset Turnover Ratio * Leverage.Net Profit Margin = Net Profit/Asset Turnover Ratio Sales = Sales/Total Assets Leverage = Total Assets/Total Equity ($ million) 2006 2007 % changeSales $30,379 $30,748 1.21% Net Profit $2,248 $2,564 14.06% Net Profit Margin 7.40 % 8.34% 0.94% Total assets $37,183 $38,803 4.36% Asset turnover ratio 0.8170132 0.792413 -2.46% Net worth $14,631 $16,016 9.47% Leverage 2.5413847 2.4227647 - 11.86%ROE 15.36% 16.01% 0.64%From the above breakdown of ROE it is clear that there is only a slight improvement in sales but the improvement in net profit is more significant, which indicates the improvement in the company's profitability. The overall net profit margin increased by 0.94%, which is a positive indicator of the company's financial performance. There is an increase in t... middle of paper... similarly, new entrants are entering the market with green technology which is making the new entrants more competent. The economic slowdown is also having a direct impact on the business as aerospace and government contracts are primarily affected by these factors. There are many growing competitors in the market that do not use the same quality as Alcoa, resulting in low-cost imports that create tougher competition. Greater investments in technology and operational efficiency are adding more pressure to the business along with energy costs. Likewise, the unfavorable currency movement is creating further problems for the company. Alcoa is present in multiple countries that are creating more exchange rate problems. They have a versatile customer base, the change in specifications and business strategy of such companies is creating more difficulties for the company.