Referring to the data for Anson Industries and Clarence Corporation in Example 14 , which of the following choices best describes reasonable conclusions an analyst might make about the companies’ ROE?

A. Anson’s inventory turnover of 76.69 indicates it is more profitable than Clarence.

B. The main driver of Clarence’s superior ROE in FY5 is its more efficient use of assets.

C. The main drivers of Clarence’s superior ROE in FY5 are its greater use of debt financing and higher net profit margin.

Data from Example 14

An analyst collects the information shown in Exhibit 16 for two companies:

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EXHIBIT 16 Anson Industries Inventory turnover DOH Receivables turnover Fiscal Year DSO Accounts payable turnover Days payable Cash from operations/Total liabilities ROE ROA Net profit margin (Net income/Revenue) Total asset turnover (Revenue/Average assets) Leverage (Average assets/Average equity) 5 76.69 4.76 10.75 4 89.09 4.10 9.33 33.95 39.13 4.62 4.36 78.97 83.77 31.41% 11.15% 5.92% 1.66% 3.70% 1.05% 3.33% 1.11% 1.11 0.95 1.60 1.58 3 147.82 2.47 11.14 32.77 4.84 75.49 4.04% 1.62% 1.05% 2 187.64 1.95 7.56 48.29 4.22 86.56 8.81% -0.62% -0.39% 1.13% -0.47% 0.93 0.84 1.54 1.60