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
E)a mining firm that is mostly engaged in exploration for new deposits

Question

Quizplus · Accepted Answer

A high ROE indicates that a company is generating a high return on its equity investment, which is a function of both profitability and efficient use of capital. The medical supply company that provides very precise instruments at a high price to large medical establishments such as hospitals likely has high profit margins due to the niche market and specialized product offering, which would lead to a high ROE.

Which of the Following Firms Would Be Expected to Have