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?

---

Definitions:

Firmly Crystallized

Describes something that is solidly formed or fully developed, often used metaphorically to describe ideas or beliefs.

Style Of Life

A unique character structure or pattern of personal behaviors and characteristics by which each of us strives for perfection. Basic styles of life include the dominant, getting, avoiding, and socially useful types.

Complex

To Jung, a core or pattern of emotions, memories, perceptions, and wishes in the personal unconscious organized around a common theme, such as power or status.

Inferiority Complex

A condition that develops when a person is unable to compensate for normal inferiority feelings.