Final answer:
The Return on Equity (ROE) can be calculated by dividing the net income of a company by its shareholder's equity. Based on the given information, we can calculate the ROE of Company B, but not Company A. Company B may have a higher ROE due to its larger base of assets.
Step-by-step explanation:
To calculate the Return on Equity (ROE) for Company A and Company B, we need to determine their equity. Equity is calculated as Assets minus Debt. For Company A, with $50 million in Assets and $11 million in Debt Assume, the equity is $50 million – $11 million = $39 million.
The Return on Equity (ROE) of a company can be calculated by dividing the net income of the company by its shareholder's equity. To find the net income, we need to subtract the company's expenses and taxes from its total revenue. In the case of Company A, we need more information about its net income to calculate the ROE. However, we can calculate the ROE of Company B because we have the necessary information.
The ROE of Company B can be calculated using the formula: ROE = Net Income / Shareholder's Equity. Assuming Company B has a net income of $30 million, the ROE can be calculated as $30 million / ($210 million - $120 million) = 0.6, or 60%.
Since we don't have the net income for Company A, we cannot calculate its ROE. However, based on the information provided, we can see that Company B has higher assets and higher debt compared to Company A. This suggests that Company B might have a higher ROE because it has a larger base of assets from which to generate income.