Ch 04: Assignment - Analysis of Financial Statements 7. More on ratio analysis 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, which of the following projects should be chosen if they have the same risk and cost of capital? O 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 firm's financial ratios with other firms in the Industry for the current year You decide also to conduct a qualitative analysis based on the factors summarized by the American Association of Individual Investors (AAH). According to your understanding, a company with one key customer is considered to be risky than companies with several customers. 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 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. Ch 04: Assignment - Analysis of Financial Statements 7. More on ratio analysis 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, which of the following projects should be chosen if they have the same risk and cost of capital? O 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 firm's financial ratios with other firms in the Industry for the current year You decide also to conduct a qualitative analysis based on the factors summarized by the American Association of Individual Investors (AAH). According to your understanding, a company with one key customer is considered to be risky than companies with several customers. 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 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