Below are selected ratios for Widget Corporation and Tools Inc. Use this information answer the following questions.
Total asset turnover
Accounts receivable turnover
Fixed assets turnover
Net profit margin
Income tax rate
We know from equity valuation models that, all other things equal, the company with the higher ROE will have a higher sustainable growth rate and thus have a higher intrinsic value. Why are all other things not likely to be equal when comparing the ROE of these two companies? Hint: look at components of ROE.
Which company has better operating performance (ignoring capital structure).
Below are selected ratios for Widget Corporation and Tools Inc. Use this ...
Solution discusses Widget Corp and Tools Inc: Analyze ratios for better operating performance