Explain why in problem 3 return on equity was so much higher than return on assets.
Answer to relevant QuestionsA firm has assets of $1,800,000 and turns over its assets 2.5 times per year. Return on assets is 20 percent. What is its profit margin (return on sales)? Given the extent of fraud in this case, should ZZZZ Best’s accounting firm be held responsible for not discovering the fraudulent activities? What is likely to be the immediate market reaction to the announcement of a share repurchase program? Does this change over the long term? Suggest some studies that would indicate the market is not completely efficient in the semistrong form. Describe the three heuristics that investors use as “rules of thumb.”
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