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. If a firm takes steps that increase its expected future ROE, its stock price will not necessarily increase. Based on your understanding of the uses and limitations of ROE, which of the following projects will a manager likely choose if his or her bonus is solely based on the ROE of the next project? Project Y, with 40% ROE and a small investment, generating low expected cash flows Project X, with 35% ROE and a large investment, generating high expected cash flows 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 firmis financial ratios with other firms in the industry for the current year: The American Association of Individual Investors (AMII) has identified several qualitative factors that should also be considered when evaluating a company's ikeiy future financial performance. Consider each scenario and indicate how you would expect the described event or situation to affect the described business organization. Eastern Manufacturing Products Inc. Eastem assembies computers in the owner's garage from parts the owner orders over the Internet. This industry is characterized by iow barriers to entry, including few operating licenses or governmental approvals, and small investments in productive equipment or facilities. Assignment - Analysis of Financial Statements compare the firm's finandal ratios for the current year with its ratios in previous years. compare the firmis finandal ratios with other firms in the industry for the current year. e American Association of Individual Investors (AAII) has identified several qualitative factors that should also be considered when evaluating a mpany's likely future finandal performance. Consider each scenario and indicate how you would expect the described event or situation to affect scribed business organization. Eastern Manufacturing Products Inc. Eastern assembles computers in the owner's garage from parts the owner orders over the Internet. This industry is characterized by low barriers to entry, including few operating licenses or governmental approvais, and small investments in productive equipment or facilities. How would you expect this situation to affect the assessment of Eastern's financial condition and performance? Although nonquantitative factors may be relevant to a company's financial evaluation in general terms, the details of this specific situation are not relevant to the firm's financial condition or performance. Its low barriers to entry expose Eastern to decreased risk of competition, which could improve the predictability of its expected future sales revenues. Its low barriers to entry expose Eastern to increased risk of competition, which could negatively affect the predictability of its expected future sales revenues