Two online magazine companies reported the following in their financial statements:

Required:

1. Compute the 2018 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 2018?
2. Compute the 2018 P/E ratio for each company. Do investors appear to value one company’s earnings more than the other’s? Explain.

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BusinessWorld Fun and Games 2018 2017 2018 2017 $ 91,420 447,151 $110,000 $108,604 $172,173 467,049 Net income Total stockholders' equity 587,186 512,814 Earnings per share Stock price when annual results reported 3.20 3.19 2.10 3.98 54.40 51.04 32.55 59.70