Generally, as long as a firm's return on assets is greater than the cost of debt, the owners' return on equity investment will decrease as the firm uses more debt.

Question

Quizplus · Accepted Answer

Leveraging debt can increase the owners' return on equity (ROE) as long as the firm's return on assets (ROA) is greater than the cost of debt, because it allows the firm to amplify its earnings without requiring additional equity investment.

Generally, as Long as a Firm's Return on Assets Is