Two music companies reported the following in their financial statements: Required: 1. Compute the 2018 ROE for
Question:
Two music companies reported the following in their financial statements:
Required:
1. Compute the 2018 ROE for each company (express ROE as a percentage rounded to one decimal place). Which company appears to generate greater returns on stockholders’ equity in 2018?
2. Compute the 2018 P/E ratio for each company. Do investors appear to value one company’s earnings more than the other’s? Explain.
Urban Youth Sound Jonx 2018 2017 2018 2017 Net income $ 27,500 $ 24,302 $ 41,500 $ 36,739 Total stockholders' equity 387,101 300,399 516,302 521,198 Earnings per share Stock price when annual results reported 1.10 1.00 0.95 0.85 20.35 18.50 16.15 14.45
Step by Step Answer:
Req1 Req2 ROE Net Income Average Stockholder...View the full answer
Fundamentals Of Financial Accounting
ISBN: 9781265440169
7th Edition
Authors: Fred Phillips, Shana Clor Proell, Robert Libby, Patricia Libby
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The Dupont analysis is an expanded return on equity formula, calculated by multiplying the net profit margin by the asset turnover by the equity multiplier. The DuPont analysis is also known as the DuPont identity or DuPont model.This Video will guide on how to calculate return on Equity and estimate profitability of shareholders using DuPont Analysis.
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