Analysts and investors often use return on equity (ROE) to compare profitability of a company with other firms in the industry. ROE is considered a very important measure, and managers strive to make the company's ROE numbers ook good An increase in ROE would imply an increase in shareholder wealth. Based on your understanding of the uses and limitations of ROE, which of the following projects will a manager likely choose if his or her bonus is solely based on the ROE of the next project? O Project Y, with 40% ROE and a small investment, generating low expected cash flows O Project X, with 35% ROE and a large investment, generating high expected cash flows Suppose you are trying to decide whether to invest in a company that generates a high expected ROE, and you want to conduct further analysis on the company's performance. If you wanted to conduct a comparative analysis for the current year, you would: Compare the firm's financial ratios for the current year with its ratios in previous years Compare the firm's financial ratios with other firms in the industry for the current year The American Association of Individual Investors (AAII) has identified several qualitative factors that should also be considered when evaluating a company's likely future financial performance. Consider each scenario and indicate how you would expect the described event or situation to affect the described business organization would How assessment of Northern's financial condition and performance? you expect this situation to affect the Northern Services Inc. O Northern's profits will continue to decline and the company's survival is in jeopardy if it does not create a new product with more potential for market growth To date, Northern has been a one-product company. It manufactures, sells, and services only one product, AM-FM radios, and that item is in the market-saturation stage of its product life cycle. As a result, Northern's profits are declining due to increased competition from new products and competing firms. O Although nonquantitative factors may be relevant to a company's financial evaluation in general terms, the details of this specific situation are not relevant to the firm's financial condition or performance For several reasons, attempts to develop and introduce new products have not been successful O Its one-product strategy increases Northern's efficiency and will ensure its long-term financial success. Although its profits are declining now, these efficiencies will ensure the company's long-term success.