Below Are Data Taken from the Financial Statements of Two

question 70

Short Answer

Below are data taken from the financial statements of two companies in the same industry: Instructions
a) Calculate the ROA and ROE for both companies. Assume total assets and equity have not changed from the previous year.
b) As an equity investor, which company would you prefer to invest in?

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Definitions:

Financial Statements

Compiled financial data that provides an overview of a company's financial position, including balance sheet, income statement, and cash flow statement.

Inventory

Items kept on hand by a company for the purpose of production or sale, encompassing raw materials, work-in-progress, and finished goods.

Moving-average Cost Method

An inventory valuation method that averages the costs of inventory over a period to calculate the cost of goods sold and ending inventory valuation.

Average-cost Method

The average-cost method is an inventory costing method that assigns an average cost to each item in inventory, used to determine the cost of goods sold and ending inventory values.