In 20X2, C Co's return on owners' equity (ROE) was 45.1%, and return on assets (ROA) was 19.6%. In 20X2, P Co's return on owners' equity (ROE) was 29.9% while return on assets was 9.3%. Which of the following statements is false?
A) P Co's return on assets (ROA) was less than half of C Co's ROA.
B) P Co's ROE was 222% greater than their ROA while C Co's ROE was only 130% greater than their ROA. This difference is caused by P Co's higher use of debt ﬁnancing to leverage their assets.
C) C Co provided higher positive ﬁnancial leverage for their shareholders compared to P Co.
D) C Co. is considerably more liquid than P Co.

Question

Quizplus · Accepted Answer

Liquidity is not directly assessed by ROE or ROA; these ratios measure profitability, not liquidity.

In 20X2, C Co's Return on Owners' Equity (ROE) Was