The following information was drawn from the Year 3 balance sheets of two companies: During Year 3,

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The following information was drawn from the Year 3 balance sheets of two companies:

Common Stock Retalned Earnings Company Assets Llablitles 300,000 180,000 120,000 Williamson Hendrix 70,000 550,000 680,0

During Year 3, Williamson’s net income was $35,800, while Hendrix’s net income was $22,900.

Required
a. Compute the return-on-equity ratio to measure the level of financial risk of both companies.
b. Compare the two ratios computed in Requirement a to identify which company is performing better.

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Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

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Question Posted: Feb 04, 2019 06:11 AM

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The following information was drawn from the Year 3 balance sheets of two companies: During Year 3,

Question:

Common Stock Retalned Earnings Company Assets Llablitles 300,000 180,000 120,000 Williamson Hendrix 70,000 550,000 680,000 120,000 440,000

Step by Step Answer:

a Company Net Income Stockholders Equity Return on Equity Ratio Wi...View the full answer

Introductory Financial Accounting for Business

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