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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372 Exercise 58
Computing and interpreting Return on Equity (ROE) and Price/Earnings (P/E) Ratios
Aaron's, Int., and Rent-A-Center, Inc. , are two publicly traded rental companies. They reported the following in their 2010 financial statements (in millions of dollars, except per share amounts and stock prices):
Required:
1. Compute the 2010 ROE for each company. Express ROE as a percentage rounded to one decimal place. Which company appears to generate greater returns on stockholders' equity in 2010
TIP : Remember that the bottom of the ROE ratio uses the average stockholders' equity.
2. Compute the 2010 P/E ratio for each company (rounded to one decimal place). Do investors appear to value one company more than the other Explain.
Aaron's, Int., and Rent-A-Center, Inc. , are two publicly traded rental companies. They reported the following in their 2010 financial statements (in millions of dollars, except per share amounts and stock prices):
Required:
1. Compute the 2010 ROE for each company. Express ROE as a percentage rounded to one decimal place. Which company appears to generate greater returns on stockholders' equity in 2010
TIP : Remember that the bottom of the ROE ratio uses the average stockholders' equity.
2. Compute the 2010 P/E ratio for each company (rounded to one decimal place). Do investors appear to value one company more than the other Explain.
Explanation
Verified
Verified
1.
Return on equity
: This is the net...
Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
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