Question

This particular company has an ROE of 13.25%, but an ROA of 1.47%. It has 75.5% of its assets in Long-term Investments, and most of the rest is in Cash and Cash Equivalents. On the Liabilities side, Current Liabilities almost match Long-term Investments. It has an Equity Multiplier of 9.15. This company is a/an:

Commercial Bank

Savings & Loan

Investment Bank

Insurance Company

Investment Company

Answer 1

The ROE is 13.25%, but ROA is only 1.47%. This indicates that assets are much higher than equity

Equity multiplier = total assets / equity. The equity multiplier of 9.15 indicates that total assets are very high compared to equity

Most of the assets (75.5%) are in long-term investments. This is indicative of an insurance company, as insurance companies have most of their assets in long-term investments. Banks have most of their investments in loans.

Hence, the company could be an insurance company or an investment company.

However, on the liabilities side, current liabilities almost match long-term investments. This is indicative of an insurance company, as insurance companies try to match assets and liabilities. Investment companies would not have current liabilities matched with long term investments. Current liabilities would be much lower for an investment company

This company is an insurance company