Question 8 (10 marks) Your manager, Emily is undertaking an analysis of these two companies. The information for the summarized balance sheet and income statement for ABC Ltd and XYZ Ltd are presented below. Balance sheet as at 30/6/21: Current assets Non-current assets Total assets ABC Ltd XYZ Ltd $ $ 34,000 47,200 57.000 80.800 91.000 128.000 Current liabilities 9.100 21,800 Non-current liabilities 20,100 60,000 Ordinary shareholders' equity 61.800 46.200 Total liabilities and shareholders' equity 91.000 128.000 Page 7 of 13 Income statement for the year ending 30/6/21: Sales Cost of sales Operating expense Interest expense Income tax expense Profit after income tax 86,500 75,800 60,500 54,000 16,900 9,000 2,100 2,200 4.500 2.000 2.500 8.600 Included in the analysis are the following two ratios (it is assumed that these have been calculated correctly): Return on owners' equity (ROE) Return on assets (ROA) ABC Ltd XYZ Ltd 4% 19% 10% 10% Emily made the following comment: "I cannot understand how two companies can have the same retum on assets but completely different rates of return on owners' equity Required: In addition to ROE and ROA ratios, use any two additional financial ratio calculations you think are necessary, explain the situation to Emily Suggested Answer: