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Unformatted text preview: rning 16.90% on the assets in which they have invested.
To determine whether is rate is good or is too low, we would need to
compare it to the ROAs of other companies in this industry(ies).
ROE $39,200.00 ÷
$39,200.00 ÷ (($76,000 + $99,600)/2)
0.4464692 = 44.65% An ROE of 44.65% is superb!! There are not many investments that have
a return this high. Management is doing a great job with the owners'
Debt to Equity $138,400.00 ÷ $238,000.00 = 58.15% This company's financing is 58.15% debt financing (or with borrowings)
and 41.85% with equity financing ( or with owners). The company
might have difficulty borrowing any additional funds from a bank,
since banks normally like to see the owners having more of the risk
than the lenders and if another loan were added, the debt to equity
ratio would be too high to meet the bank's requirements....
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- Fall '14