Front Beam Lighting Company has the following ratios compared to its industry for 2008. Front Beam LightingIndustryReturn on assets12%5%Return on equity16%20% Please use Du Pont system of analysis to calculate and explain why the return-on-equity ratio is so much less favorable than the return-on-assets ratio compared to the industry.

Given information: Return on assets of Front Beam is 12% Return on assets of Industry is 5% Return…

Answered: Front Beam Lighting Company has the…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter13: Financial Statement Analysis

Section: Chapter Questions

Problem 13.8E

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Front Beam Lighting Company has the following ratios compared to its industry for 2008.

	Front Beam Lighting	Industry
Return on assets	12%	5%
Return on equity	16%	20%

Please use Du Pont system of analysis to calculate and explain why the return-on-equity ratio is so much less favorable than the return-on-assets ratio compared to the industry.

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