Question

Land Land Land, Inc. has a return on common equity of 20%. The average return on common equity for the firm's industry is 25%. Based on this information you know that:

Question 4 options:

	LLL has relatively more debt than the average firm in the industry.
	LLL has relatively less debt than the average firm in the industry.
	LLL generates more income for shareholders than the average firm in the industry.
	LLL generates less income for shareholders than the average firm in the industry.

Answer 1

Return on common equity indicates how well the company ot its management is generating the Return with the given amount of Equity.

If the Return is more better the equity is managed to generate higher returns and vice versa if return is less.

So in the given instance LLL return on common equity 20% is less than the average industry return of 25%

So LLL is generates less income for shareholders than the average in the industry.

Answer is LLL generates less income for shareholders than the average firm in the industry.