If two firms, GUW and BFG, have the same return on equity (ROE), then:
I.The two companies must have the same operating performance.
II.If GUW has higher leverage than BFG, then GUW must also have higher operating performance.
III.If BFG has lower operating performance than GUW, then BFG must have higher leverage.
A)Only I is true
B)Only III is true
C)Only I and III are true
D)Only II and III are true

Question

Quizplus · Accepted Answer

If BFG has lower operating performance than GUW, it must compensate with higher leverage to maintain the same ROE.

If Two Firms, GUW and BFG, Have the Same Return