In 2012, C Co's return on owners' equity (ROE) was 45.1%, and return on assets (ROA) was 19.6%. In 2012, P Co's return on owners' equity (ROE) was 29.9% while return on assets was 9.3%. Which of the following statements is false?
A) C Co. is considerably more liquid than P Co.
B) P Co's ROE was 222% greater than their ROA while C Co's ROE was only 130% greater than their ROA. This difference is caused by P Co's higher use of debt financing to leverage their assets.
C) C Co provided higher positive financial leverage for their shareholders compared to P Co.
D) P Co's return on assets (ROA) was less than half of C Co's ROA.

Question

Quizplus · Accepted Answer

The given information does not provide any indication of the liquidity of C Co or P Co. The false statement is A as there is no information given about the liquidity of either company.

In 2012, C Co's Return on Owners' Equity (ROE) Was