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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 88
Computing and Interpreting Return on Equity (ROE)
Two music companies reported the following in their 2012 financial statements:
Required:
1. Compute the 2012 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 2012
2. Compute the 2012 P/E ratio for each company. Do investors appear to value one company more than the other Explain.
3. Sound Jonx had reacquired 5,000 shares of common stock in 2012 at $13 per share. Recalculate the company's ROE for 2012 assuming that this stock repurchase had not occurred. Does this new ROE change your interpretation of the ROE ratios calculated in requirement 1
Two music companies reported the following in their 2012 financial statements:
Required:
1. Compute the 2012 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 2012
2. Compute the 2012 P/E ratio for each company. Do investors appear to value one company more than the other Explain.
3. Sound Jonx had reacquired 5,000 shares of common stock in 2012 at $13 per share. Recalculate the company's ROE for 2012 assuming that this stock repurchase had not occurred. Does this new ROE change your interpretation of the ROE ratios calculated in requirement 1
Explanation
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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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