Ware Company Has a Return on Assets of 15% and a Return

question 140

Essay

Ware Company has a return on assets of 15% and a return on common stockholders' equity of 10%.John Ware,the president of the company,has asked you to explain the reason for this difference.What causes the difference? How is the concept of financial leverage involved?

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Definitions:

Brain Development

The process of growth and maturation of the brain, which includes changes in structure, function, and complexity over time.

External Stimuli

External forces or conditions that influence behavior, perception, or physiological responses.

Formal Operations

The final stage in Piaget's theory of cognitive development, marked by the ability to think abstractly and reason hypothetically.

Abstract Thinking

The cognitive ability to understand concepts that are not grounded in physical reality, and to use general principles to solve problems and generate new ideas.