Years 1 & 2 ($000,000s)

-Income Statement
CFM Majestic Inc.
Years 1 & 2 ($000,000s)

Referring to the CFM Majestic financial statements,which is the bigger or more important determinant of the change in ROE?

Question

Years 1 & 2 ($000,000s)
 
-Income Statement
CFM Majestic Inc.
Years 1 & 2 ($000,000s)

Referring to the CFM Majestic financial statements,which is the bigger or more important determinant of the change in ROE?

Quizplus · Accepted Answer

ROA is the more important force acting on the decrease in ROE. 1 + D/E stayed constant during the two years, but what happened was our income went down and our assets went up (i.e. we are not being as efficient with our assets), therefore ROA is the bigger factor.