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 increase. 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 trend analysis, you would: Compare the firm's financial ratios with other firms in the industry for a particular year Analyze the firm's financial ratios over time You decide also to conduct a qualitative analysis based on the factors summarized by the American Association of Individual Investors (AA). According to your understanding, a company with less competition is considered to be risky than companies with multiple competitors. The American Association of Individual Investors (AAII) has identified several qualitative factors that should also be considered when evaluating a company's likely future financial performance. Consider the scenario and indicate how you would expect the described event or situation to affect the described business organization. Southern Supply Inc. The family who founded and operates Southern Supply Inc. is headed by a strong-willed and very astute octogenarian. The company has no succession plan for replacing him in the event of his injury, death, or incapacitation How would you expect this situation to affect the assessment of Southern's financial condition and performance? The absence of a succession plan for Southern's leader and driving force can place the organization in serious jeopardy. A firm's financial condition and performance are the result of decisions made by the firm's leadership and staff, 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 Because the company is family owned, succession planning should not be an issue, and the family can pull together to run the organization when the leader dies. This should ensure that the company's expected future performance is maintained