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Dandy Co. had $1,000,000 of assets, financed entirely by common shares ($600,000) and retained earnings ($400,000). The operating profit for the year was $250,000, and
Dandy Co. had $1,000,000 of assets, financed entirely by common shares ($600,000) and retained earnings ($400,000). The operating profit for the year was $250,000, and tax was paid on the profits at the rate of 40%. The return on equity ratio was lower than the return on assets ratio because of (A) leverage (B) tax expense (C) a calculation error; the return on equity ratio was in fact higher than the return on assets ratio (A)&(B), but not (C) (A),(B)&(C)
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