Question: 1. Computing ROE and ROA: Both ROA and ROE measure profitability. Which one is more useful for comparing two companies? Why? 2. (Graded) Ratio Analysis:

1. Computing ROE and ROA: Both ROA and ROE measure profitability. Which one is more useful for comparing two companies? Why?

2. (Graded) Ratio Analysis: Consider the ratio EBITD/Assets. What does this ratio tell us? Why might it be more useful than ROA in comparing two companies?

3. Return on Investment: A ratio that is becoming more widely used is return on investment. Return on investment is calculated as net income divided by long-term liabilities plus equity. What do you think return on investment in intended to measure? What is the relationship between return on investment and return on asset?

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