# Predicting Financial Performance in the IT Industry with Machine Learning: ROA and ROE Analysis
## 2 Literature  
It is known that ROA and ROE are among the indicators used to measure, evaluate and analyze the performance of enterprises. When the literature is examined, it is seen that these ratios provide important information about the profitability, performance and financial structure of the enterprise. ROA is used to measure how efficiently a company uses its assets, while ROE provides information about the efficiency of the use of the company's equity. Accurate and reliable analysis of these ratios is critical for both internal and external users of information. When the studies on the importance of ROA in the literature are examined, it is seen that these studies are especially on determining how effectively the assets of the enterprise are used. For example, [PERSON] (2013) and [PERSON] (2007) emphasize in their study that a high ROA indicates that the enterprise earns high profits by using its assets efficiently, and this shows the operational efficiency and management success of the enterprise. In this context, it is known that ROA is effective in all operational processes of the enterprise, from production processes to marketing activities [1; 2]. ROE is considered in the literature as a critical tool for assessing companies' return on equity and shareholder returns. In their study, [PERSON] and [PERSON] (2017) emphasize that a high ROE indicates that the firm generates high returns by using its equity effectively, which is attractive to investors. At the same time, ROE is also used to assess the effectiveness of a firm's financial strategies and capital structure. There are many studies in the literature that ROE also reflects the sustainable growth rate and competitiveness of the business [3]. The relationship between ROA and ROE and the evaluation of these ratios together are frequently emphasized in the literature. There are many studies on this subject. For example, [PERSON] (2012) and [PERSON], and [PERSON] (2016) state that analyzing these two ratios together allows for a more holistic understanding of business performance. ROA focuses on the efficiency of assets, while ROE focuses on return on equity. Analyzing the two ratios together provides information about a company's debt utilization and financial risk management. For this reason, ROA and ROE have been included in the literature as key financial indicators that should be considered together for a comprehensive evaluation of business performance. Table 1 presents studies that include ROA and ROE [4; 5]. \begin{table}
\begin{tabular}{c c c c} \hline \hline
**Author/Year** & **Article Title** & **Variables** & **Machine Learning Technique** \\ \hline \multirow{4}{*}{ \begin{tabular}{c} [PERSON], [PERSON], 2024 [6] \\ \end{tabular}  } & \multirow{4}{*}{ \begin{tabular}{c} Research on applying machine \\ learning models to predict and \\ assess return on assets (ROA) \\ \end{tabular}  } & \multirow{4}{*}{ \begin{tabular}{c} Days sales outstanding, Days inventory \\ outstanding, Days payable outstanding, \\ Cash conversion cycle, Networking capital, \\ Financial leverage, Current ratio, Growth \\ rate, Return on equity, Earnings before \\ interest taxes, Gross margin \\ \end{tabular}  } & \multirow{4}{*}{ \begin{tabular}{c} Lasso, Ridge, K Neighbor \\ Regressor, SVR, Random Forest, \\ GBR, XGBoost, MLP Regression \\ \end{tabular}  } \\  & & & \\ \hline \multirow{4}{*}{ \begin{tabular}{c} [PERSON], \\ [PERSON], and \\ [PERSON], 2020 [7] \\ \end{tabular}  } & \multirow{4}{*}{ \begin{tabular}{c} Does Good ESG Lead to Better \\ Financial Performances by \\ Firms? Machine Learning and \\ Logistic Regression Models of \\ Public Enterprises in Europe \\ \end{tabular}  } & \multirow{4}{*}{ \begin{tabular}{c} Emission score, CO\({}_{2}\) equivalent emissions, \\ Resource use score, ESG score, ESG score, \\ Environmental innovation score, Salary gap, \\ Number of employees in the CSR reporting, \\ Number of women employees, Workforce \\ score, Management score, Operating income, \\ Net income, Change in total equity \\ \end{tabular}  } & \multirow{4}{*}{