Attempts 2 Keep the Highest 275 7. More on ratio analysis Analysts and investors often use return on equity (ROE) to compare profitability of a company with other forms 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 ROI would imply an increase in shareholder wealth 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 X, with 35% ROE and a large investment, generating high expected cash flows O Project, with 40% ROE and a small investment, generating low 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 analys on the company's performance. If you wanted to conduct a trend analyse, you would: Compare the firm's financial ratos with other time 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 (Al). According to your understanding, a company with one key customer is considered to be risky than companies with several customers Sarh The American Association of Individual Investors (All) 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. Western Amalgamated Corp. As a result of targeting by unethical product liability attorneys, Western, a small manufacturer of a revolutionary crawfish steamer currently has a multimillion dollar class action lawsuit pending Although the steamer is completely reliable and safe, one person was injured as a result of using it inappropriately. Other purchasers have joined the lawsuit in an effort to collect "free" funds How would you expect this situation to affect the assessment of Western's financial condition and performance? Although nonquantitative factors may be relevant to a company's financial evaluation general terms, the details of this specific situation are not relevant to the firm's financial condition or performance. Lawsuits guarantee free advertising and therefore should be guaranteed to increase the firm's current and future sales and profits, Being small, Western may lack the financial resources and media management expertise to successfully defend itself in the lawsuit and the media. This could jeopardive Western's current and future sales and profits