When a company can leverage funds at a rate that is less than the after-tax return on assets,the return on equity will exceed the return on assets.

Question

Quizplus · Accepted Answer

This is because the company can borrow money at a lower interest rate than what it is earning on its assets. This increases the profits earned on the equity invested in the company, leading to a higher return on equity than return on assets.

When a Company Can Leverage Funds at a Rate That