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TomTom is a Netherlands-based designer and manufacturer of portable GPS car navigation systems that it sells
across the world. The company’s initial public offering in 2005 helped boost the company’s revenues from
E192 million in 2004 to E1,364 million in 2006. In the fourth quarter of 2007, TomTom acquired 29.9 percent of
the shares of Tele Atlas, a provider of digital maps. The company completed the acquisition in 2008.
The following tables show the components of return on equity and balance sheet items as a percentage of sales for
TomTom N.V. for 2006, 2007, and 2008. The ratios have been calculated after removing the margin effect of a one-
time impairment charge in 2008:
1. Summarize the main factors behind the decrease in TomTom’s ROE in 2007 and the increase in the company’s
ROE in 2008.
2. What effect did the acquisition of a 29.9 percent stake in Tele Atlas have on the components of TomTom’s
ROE in 2007?
3. What effect did the acquisition of a majority stake in Tele Atlas have on the components of TomTom’s ROE
in 2008?