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18 December, 13:30

Suppose you are trying to decide whether to invest in a company that generates a high expected ROE, and you want to conduct further analysis on the company's performance. If you wanted to conduct a comparative analysis for the current year, you would: Compare the firm's financial ratios for the current year with its ratios in previous years Compare the firm's financial ratios with other firms in the industry for the current year

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  1. 18 December, 13:40
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    Compare the firm's financial ratios with other firms in the industry for the current year

    Explanation:

    return on equity (ROE) = net income / stockholders' equity

    it measures how profitable the company is according the amount of money that stockholders' invested in it.

    Since you are trying to conduct a comparative analysis for the current year, it doesn't make sense to compare the current financial ratios with the financial ratios of previous years. If you want to compare the current year, you must compare the current financial ratios to the ratios of other companies in the same industry or the industry as a whole.
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