Which of the following firms would be expected to have a high ROE based on that firm's high profitability?
A) a medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals
B) a low-end retailer that has a low mark-up on all items it sells
C) a brokerage firm that has high levels of leverage
D) a grocery store chain that has very high turnover, selling many multiples of its assets per year

Question

Quizplus · Accepted Answer

A medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals is expected to have a high ROE based on its high profitability because of the high margins it enjoys on its products. The precision and complexity of the instruments, coupled with the large volume of sales to well-funded buyers, means that the company can earn a high return on its investment.

Which of the Following Firms Would Be Expected to Have