Answered: Use the docmposed ROE framework to…

Business

Accounting

Use the docmposed ROE framework to provide possible reasons for this difference based on the figure on the table below:

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter5: Sales And Receivables

Section: Chapter Questions

Problem 87APSA

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

Use the docmposed ROE framework to provide possible reasons for this difference based on the figure on the table below:

Q3: In 2019, Woolworths Group had a return on equity of 25.6%, whereas its supermarket
industry competitor Coles Group Ltd earned 43.4%. use the decomposed ROE framework to
provide possible reasons for this difference based on Figure 5.15.
Woolworths
Coles
2019
2018
2019
2018
Return on sales
4.6%
3.1%
3.7%
4.0
Asset turnover
2.56
2.45
3.45
3.12*
Leverage
2.17
2.24
3.38
3.86*
* Not calculated for average total assets and average equity due to the unavailability of 2017
comparison figures

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