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: High ROE and low risk 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 canduct further analysis on the company's performance. If you wanted to conduct a trend analysis, you would: Analyze the firm's financial ratios over time Compare the firm's financial ratios with other firms in the industry for a particular year Yau decide also to cenduct a quallative analysis based on the factors summarized by the American Association of Individual investors (AAi1). According to your understanding, a company with one key product is considered to be _ risky than companies with a wide range of products. The American Association of Individual investors (AAII) has identified severat 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 tne. The family whe founded and operates Southern Supply inc. is headed by a strong-willed and very astute octogenarian. The cornpany has no successien plan for replacing him in the event of his injury, death, or incapacitation. Now would you expect this situation to affect the assessment of Southem's financial condikien and performance? Although nonquantitative factors may be relevant to a company's financal evaluation in general terms, the details of this specific situation ere not relevant to the firm's financial condation or performance. Because the compary is family owned, succession planning should not be an issue, and the family can puil together to run the organization when the leader dies. This should ensure that the companys expected future performance is maintained. The absence of a succession plan for Seuthern's leader and driving force can place the orpaniration in serlous jeopardy. A firm's ninancial condition and performance are the result of decisions made by the firm's leadernhip and staff