Taxes are 35% and all dollars are in millions.
Company A and Company B
Earnings before interest and taxes $280 $294
Debt $140 $840
Equity $560 $210
a) Calculate each company's ROE, ROA, and ROIC.
b) Why is Company B's ROE so much higher than Company A's? Does this mean Company B is a better company? Why or why not?
c) Why is Company A's ROA higher than Company B's? What does this tell you about the two companies?
d) How do the two companies' ROICs compare? What does this suggest about the two companies?