If a firm produces a 10 % return on assets and also a 10 % return on equity, then the firm:
A) Has no debt of any kind.
B) Is using its assets as efficiently as possible.
C) Has no net working capital.
D) Also has a current ratio of 10.
E) Has an equity multiplier of 2.

Question

Quizplus · Accepted Answer

When a firm has the same return on assets (ROA) and return on equity (ROE), it indicates that the firm is not using debt financing, as debt would typically increase ROE compared to ROA.

If a Firm Produces a 10 % Return on Assets