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A few key ratios for firm X and firm Y have been presented below. Answer the questions based on the information presented here. Why is
A few key ratios for firm X and firm Y have been presented below. Answer the questions based on the information presented here.
Why is firm Xs ROE greater than firm Ys ROE? Use the DuPont identity to explain your answer.
\begin{tabular}{lcc} & Firm X & Firm Y \\ \hline Net Profit Margin & 3.00% & 4.00% \\ EBIT Margin & 10.00% & 12.00% \\ Asset Turnover & 4.00 & 1.50 \\ Debt to Assets Ratio & 0.50 & 0.67 \\ Current Ratio & 1.50 & 2.00 \\ Equity Multiplier & 2.00 & 3.00 \\ ROE & 24.00% & 18.00% \end{tabular}Step by Step Solution
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