Question
Firm A and firm B have debt-total asset ratios of 35% and 30% and ROA of 12% and 11%, respectively. Which firm has a greater ROE?
I think that it is firm B since it has more equity financing its assets.
I think that it is firm B since it has more equity financing its assets.
Answers
MRSAmercasn
correct!
Anonymous
More Equity means higher denominator. Higher denominator, lower percentage, lower ROE