Question

If the average ROE in the heating and cooling industry is 10.1%, and Thermacorp's ROE is 17.3%, Thermacorp is said to have

A) below average accounting performance.
B) above average economic performance.
C) above average accounting performance.
D) below average economic performance.

Answer 1

Thermacorp's ROE of 17.3%, compared to the industry average of 10.1%, indicates that it has above average accounting performance.

Step-by-step explanation:

If the average return on equity (ROE) in the heating and cooling industry is 10.1%, and a company in the same industry, Thermacorp, has an ROE of 17.3%, then Thermacorp is said to have above average accounting performance. This is because their ROE is significantly higher than the industry average. ROE is a measure of a company's profitability and denotes how well the company uses investments to generate earnings growth. Thus, a higher ROE indicates a company that is performing better than its peers financially.