The following selected financial information was obtained from the 2015 financial reports of Robotronics Inc. and Technology, Limited:

Assume that total assets, total liabilities, and total shareholders’ equity were constant throughout 2015.

a. Assume that you are considering purchasing the common stock of one of these companies. Which company has a higher return on equity? Would your conclusion be different if the impact of the unusual item had not been included in net income? Should unusual items be considered? Why or why not?
b. Which company uses leverage more effectively? Does your answer change if you do not consider the impact of the unusual item on netincome?

  • CreatedAugust 19, 2014
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