Question 3

(1)

Conclusion

Although Company A and Company B both have an ROE of 18%, they achieve that ROE in different ways. Company A mainly relies on a high net profit margin. It may be a premium brand, a technology company, a luxury goods company, or a business with strong pricing power. Company B mainly relies on high asset turnover. It may be a retailer, supermarket chain, or consumer goods company. Its profit per unit is lower, but it sells quickly and uses its assets efficiently.