Question

11. More on ratio analysis Analysts and investors often use return on equity (ROE) to compare profitability of a company withThe American Association of Individual Investors (AAII) has identified several qualitative factors that should also be consid

0 0
Add a comment Improve this question Transcribed image text
Answer #1

A high ROE and low risk
A rational investor always chooses a investment which gives highest possible return at a certain level of risk i.e High ROE and low risk   because with high risky securities there is always a chance of more uncertainty and unpredictability , So it is a  better investment option to choose securities with low risk .

Analyze the firm's financial ratios over time.

Trend analysis would be to use firm's history that is firms ratios to get a better idea about its future , to identify a trend in the returns given by a firm and then make an informed decision , that's a reason why using firm's ratio over time is a better option then comparing with similar firms.

Its low barriers to entry exposes western to increase risk of competition , which could negatively affect the predictability of it future revenues, the reason being the non qualitative factors are always important no matter the size of the firm , also as there is low barriers to entry any company could start a similar business and if it has large funding , it could take over the whole market of the western corp that could affect its revenue

Add a comment
Know the answer?
Add Answer to:
11. More on ratio analysis Analysts and investors often use return on equity (ROE) to compare...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • 11. More on ratio analysis Aa Aa E Analysts and investors often use return on equity...

    11. More on ratio analysis Aa Aa E Analysts and investors often use return on equity (ROE) to compare profitability of a company with other firms in the industry. ROE is considered a very important measure, and managers strive to make the company's ROE numbers look good. If a firm takes steps that increase its expected future ROE, its stock price will increase. Based on your understanding of the uses and limitations of ROE, a rational investor is likely to...

  • 11. More on ratio analysis Analysts and investors often use return on equity (ROE) to compare...

    11. More on ratio analysis Analysts and investors often use return on equity (ROE) to compare profitability of a company with other firms in the industry. ROE is considered a very important measure, and managers strive to make the company's ROE numbers look good. If a firm takes steps that increase its expected future ROE, its stock price will increase. Based on your understanding of the uses and limitations of ROE, which of the following projects will a manager likely...

  • Correctly answer each part of question 8 Analysts and investors often use return on equity (ROE)to...

    Correctly answer each part of question 8 Analysts and investors often use return on equity (ROE)to compare profitability of a company with other firms in the industry. ROE is considered a very important measure, and managers strive to make the company's ROE numbers look good. If a firm takes steps that increase its expected future ROE, its stock price will increase. Based on your understanding of the uses and limitations of ROE, a rational investor is likely to prefer an...

  • 10. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis...

    10. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company's financial performance, as measured by its return on equity (ROE). Depending on the version used, the DuPont equation will deconstruct the firm's ROE, its best measure of financial performance, into two or three important factors, or drivers. DuPont analysis can be conducted using either the traditional DuPont equation or the extended DuPont equation. The...

  • 10. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis...

    10. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company's financial performance, as measured by its return on equity (ROE). Depending on the version used, the DuPont equation will deconstruct the firm's ROE, its best measure of financial performance, into two or three important factors, or drivers. DuPont analysis can be conducted using either the traditional DuPont equation or the extended DuPont equation. The...

  • Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess...

    Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company's financial performance, as measured by its return on equity (ROE). Depending on the version used, the DuPont equation will deconstruct the firm's ROE, its best measure of financial performance, into two or three important factors, or drivers. DuPont analysis can be conducted using either the traditional DuPont equation or the extended DuPont equation. The traditional equation is constructed...

  • Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better...

    Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors that drive a company's financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the ROE into three components, analysts can see why a company's ROE may have changed for the better or worse, and identify particular company strengths and weaknesses. The DuPont Equation A DuPont analysis is conducted using the DuPont equation, which...

  • Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better...

    Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors that drive a company's financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the ROE into three components, analysts can see why a company's ROE may have changed for better or worse and identify particular company strengths and weaknesses. The DuPont Equation A DuPont analysis is conducted using the DuPont equation, which helps...

  • 10. The DuPont equation Aa Aa E Corporate decision makers and analysts often use a technique...

    10. The DuPont equation Aa Aa E Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company's financial performance, as measured by its return on equity (ROE). Depending on the version used, the DuPont equation will deconstruct the firm's ROE, its best measure of financial performance, into two or three important factors, or drivers. DuPont analysis can be conducted using either the traditional DuPont equation or the extended...

  • 7. DuPont equation Corporate decision makers and analysts often use a particular technique, called a DuPont...

    7. DuPont equation Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors that drive a company's financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the ROE into three components, analysts can see why a company's ROE may have changed for the better or worse, and identify particular company strengths and weaknesses. The DuPont Equation A DuPont analysis is conducted using the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT