Question

 

JZ Inc. has (net income / sales )= .10, (sales / assets)= 2, and (assets / equity)= 1.5

SZInc. has (net income / sales )= .30, (sales / assets)= 1, and (assets / equity)= 1

CZ Inc. has (net income / sales )= .05, (sales / assets)= 2, and (assets / equity)= 2

 

13)   What is the Return on Assets (ROA) for CZ Inc.? Please give your answer in decimal form and not as a percentage (just like above where net income / sales = .10 is in decimals).   

Please put the number on the answer sheet.

 

 

14)   What is the Return on Equity (ROE)for CZ Inc.? Please give your answer in decimal form and not as a percentage (just like above where net income / sales = .10 is in decimals).   

Please put the number on the answer sheet.

 

 

 

 

 

15)   If you were going to invest in one of the companies as an individual stock investor (equity holder), which company would you invest in?

A. JZ INC.

B. SZ INC.

C. CZ INC

D. You are indifferent between JZ INC. and SZ INC. since they have the same ROE

E. You are indifferent between CZ INC. and SZ INC. since they have the same ROE

 

 

Answer 1

Answer 13 :

ROA = Net income/sales * sales/assets

CZ Inc. ROA = 0.05*2 ==> 0.10

Answer 14 :

ROE = Net income/sales * sales/assets * assets/equity

CZ Inc. ROE = 0.05*2*2 ==> 0.20

Answer 15 :

JZ Inc. ROE = 0.10*2*1.5 ==> 0.30

SZ Inc. ROE = 0.30*1*1 ==> 0.30

CZ Inc. ROE = 0.05*2*2 ==> 0.20

D. You are indifferent between JZ INC. & SZ INC. since they have the same ROE.