8. More on ratio analysis Aa Aa 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. An increase in ROE would imply an increase in shareholder wealth. Based on your understanding of the uses and limitations of ROE, a rational investor is likely to prefer an investment option that has: O High ROE and low risk O High ROE and high risk Suppose you are trying to decide whether to invest in a company that generates a high expected ROE, and you want to conduct further analysis on the company's performance. If you wanted to conduct a comparative analysis for the current year, you would: Compare the firm's financial ratios for the current year with its ratios in previous years Compare the firm's financial ratios with other firms in the industry for the current year You decide also to conduct a qualitative analysis based on the factors summarized by the American Association of Individual Investors (AAII). According to your understanding, a company with one key customer is considered to be risky than companies with several customers