Question

it doesnt say much which is why i am confused the book states.. Interpret the ratios......

it doesnt say much which is why i am confused the book states.. Interpret the ratios... If the company ratio is better than the industry enter "B". If it is worse, enter "W".

question

RETURN ON ASSETS

COMPANY 22.5%

INDUSTRY  20.8%

Question

RETURN ON EQUITY:

COMPANY  49.22%

INDUSTRY  35.0%

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Answer #1


1.

RETURN ON ASSETS

COMPANY 22.5%

INDUSTRY 20.8%

Answer: “B”

ROA = Net income / Total assets

We would prefer higher returns on assets. The company is yield 22.5% return vs 20.8% return posed by industry hence, better performance by Company vs Industry

2.

----------------------------

RETURN ON EQUITY:

COMPANY 49.22%

INDUSTRY 35.0%

Answer: “B”

ROE = Net income / Total equity

Return on equity for Company is higher than Industry. Higher ratios are almost always better than lower ratios.

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