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ROE (Five-way Basis) of firms A and B

TABLE

ROE (Five-way Basis) of firms A and B

ROE (Five-way Basis) of firms A and B

Table shows that there is little impact of taxes and interest payment on the difference in the ROE of the two firms (as reflected in the EAT/EBT as well as BT/EBIT ratios). The financial, leverage ratio, as pointed out earlier is a major explanatory factor for higher ROE of Firm A vis-a-vis Firm B.

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