The following information was drawn from the Year 5 balance sheets of two companies: During Year 5,

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The following information was drawn from the Year 5 balance sheets of two companies:

Retained Earnings 115,000 Common Stock Assets Liabilities Company 420,000 105,000 240,000 Butler Lynch 100,000 260,000 6

During Year 5, Butler’s net income was $25,200, while Lynch’s net income was $43,200.

Required
a. Compute the return-on-equity ratio to measure the level of financial risk of both companies.
b. Compare the two ratios computed in Requirement a to identify which company is performing better.

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Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

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Question Posted: Feb 04, 2019 06:07 AM

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The following information was drawn from the Year 5 balance sheets of two companies: During Year 5,

Question:

Retained Earnings 115,000 Common Stock Assets Liabilities Company 420,000 105,000 240,000 Butler Lynch 100,000 260,000 600,000

Step by Step Answer:

a Company Net Income Stockholders Equity Return on Equity Rati...View the full answer

Introductory Financial Accounting for Business

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