CP11-5 (Algo) Computing and Interpreting Return on Equity (ROE) and Price/Earnings (P/E) Ratios [LO 11-5]

Eagle Flights, and Albatross Airlines are two publicly traded airline companies. They reported the following in their financial statements (in millions of dollars, except per-share amounts and stock prices):

	Eagle		Albatross
	2021	2020	2021	2020
Net income	$ 4,015	$ 3,592	$ 2,555	$ 3,503
Total stockholders' equity	13,837	14,060	9,943	10,520
Earnings per share	5.71	4.55	4.33	5.82
Stock price when annual results reported	52.13	54.74	58.54	55.61

Required:

1-a. Compute the 2021 ROE for each company. Express ROE as a percentage. TIP: Remember the bottom of the ROE ratio uses the average stockholders equity.

1-b. Which company appears to generate greater returns on stockholders equity in 2021?

2-a. Compute the 2021 P/E ratio for each company.

2-b. Which company do investors appear to value more?

please help thank you.

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