In 2012, C Co's Return on Owners' Equity (ROE) Was

question 5

Multiple Choice

In 2012, C Co's return on owners' equity (ROE) was 45.1%, and return on assets (ROA) was 19.6%. In 2012, P Co's return on owners' equity (ROE) was 29.9% while return on assets was 9.3%. Which of the following statements is false?

• A) C Co. is considerably more liquid than P Co.
• B) P Co's ROE was 222% greater than their ROA while C Co's ROE was only 130% greater than their ROA. This difference is caused by P Co's higher use of debt financing to leverage their assets.
• C) C Co provided higher positive financial leverage for their shareholders compared to P Co.
• D) P Co's return on assets (ROA) was less than half of C Co's ROA.

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Definitions:

Revenue Growth

The increase in a company's sales and income over time.

Collective Bargaining

The process by which workers, through their unions, negotiate contracts with their employers to determine their terms of employment.

Union Shop

A workplace where employees are not required to join the union in order to be hired but must join shortly thereafter and remain members as a condition of employment.

Secondary Picketing

Picketing at other than the employer’s place of business.