Which of the Following Firms Would Be Expected to Have

question 93

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 low-end retailer that has a low mark-up on all items it sells
• C) a brokerage firm that has high levels of leverage
• D) a grocery store chain that has very high turnover, selling many multiples of its assets per year

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Definitions:

PCAOB

The Public Company Accounting Oversight Board, an organization established to oversee the audits of public companies to protect the interests of investors.

Public Accounting Firms

Professional service organizations that provide auditing, tax, consulting, and accounting services to businesses and individuals.

CDOs

Collateralized Debt Obligations, a type of structured asset-backed security (ABS) with different tranches that can be impacted by mortgage, auto loan, and credit card debt defaults.

Rating Agencies

Companies that assess the financial strength of entities, like corporations and governmental bodies, and their ability to meet financial obligations, issuing ratings that reflect that assessment.