The following selected financial information was obtained from the 2015 financial reports of Robotronics Inc. and Technology, Limited:

Assume that total assets, total liabilities, and total shareholders’ equity were constant throughout 2015.

REQUIRED:
a. Assume that you are considering purchasing the common stock of one of these companies. Which company has a higher return on equity? Would your conclusion be different if the impact of the unusual item had not been included in net income? Should unusual items be considered? Why or why not?
b. Which company uses leverage more effectively? Does your answer change if you do not consider the impact of the unusual item on netincome?

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Robotronics Inc. Technology Ltd $ 175,000 1,300,000 1,675,000 $100,000 Interest expense Unusual gain (net of taxes of $320,000) Net income (including unusual items) Current liabilities Bonds payable Mortgage payable Common stock Additional paid-in capital Retained earnings 610,000 140,000 725,000 1,490,000 500,000 215,000 290,000 $3,360,000 25,000 405,000 600,000 325,000 515,000 $1,870,000 Total liabilities and shareholders' equity