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The following information was drawn from the Year 5 balance sheets of two companies: Company Butler Lynch Assets 420,000 600,000 Liabilities 105,000 240,000 + +
The following information was drawn from the Year 5 balance sheets of two companies: Company Butler Lynch Assets 420,000 600,000 Liabilities 105,000 240,000 + + + Common Stock 200,000 100,000 + Retained Earnings + 115,000 260,000 During Year 5, Butler's net income was $25,200, while Lynch's net income was $43,200. Required a. Compute the return-on-equity ratio to measure the level of financial risk of both companies. Company Butler Lynch Return on Equity Ratio % % b. Compare the two ratios computed in Requirement a to identify which company is performing better. Which company is performing better
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