Which of the Following Firms Would Be Expected to Have

question 14

Multiple Choice

Which of the following firms would be expected to have a high ROE based on that firm's high profitability?

• A) a medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals
• B) a grocery store chain that has very high turnover, selling many multiples of their assets per year
• C) a brokerage firm that has high levels of leverage
• D) a low-end retailer that has a low markup on all items it sells

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Definitions:

DRD

DRD refers to the Dividends Received Deduction, a provision that allows corporations receiving dividends from related entities a deduction to reduce taxable income, aiming to mitigate triple taxation.

Taxable Income

The portion of income that is subject to income tax after all deductions and exemptions are applied.

Publicly-traded Domestic Corporation

A company whose shares are traded on a public stock exchange within the issuing country, subject to regulation and reporting requirements.

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional shares.