The data in Table P2.3 are available for two companies, A and B, all stated in millions.
Question:
(a) Calculate each company's return on equity (ROE) and return on total assets (ROA).
(b) Why Company B's ROE so much higher than Company A's? Does this mean Company B is a better company? Why or why not?
(c) If Companies A and B were combined (merged), what would be the impact on the results on ROE? Under what conditions would such a combination make sense?
Data in Table P2.3
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