Question

In: Finance

When would the return on equity (ROE) definitely equal the return on assets (ROA)? Whenever a...

When would the return on equity (ROE) definitely equal the return on assets (ROA)?

Whenever a firm's total debt ratio is equal to zero.

Whenever a firm's long-term debt ratio is equal to zero.

Whenever a firm's return on equity is equal to 100%.

Whenever a firm has no long-term debt.

Whenever a firm's debt-to-equity ratio is equal to one.

Solutions

Expert Solution

ROE is equal to ROA when there is no debt in the balance sheet as the entire asset is funded through equity.

ROE = Net profit/ Equity and ROA = EBIT*(1-t) / Total assets

When there is no debt, EBIT*(1-t) = Net profit and Assets = Equity

Answer is

Whenever a firm's total debt ratio is equal to zero.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Sales/Total assets = 4.5× Return on assets (ROA) = 10.0% Return on equity (ROE) = 50.0%...
Sales/Total assets = 4.5× Return on assets (ROA) = 10.0% Return on equity (ROE) = 50.0% Book Value of Stockholders’ equity = $30 Price/Earnings ratio = 6.0x Common shares outstanding = 50 Market/Book ratio = 3.0x A. Calculate the price of a share of the company’s common stock. B. Calculate debt-to-assets ratio assuming the firm uses only debt and common equity. C. What were sales last year? D. What is the company’s market value?
Define and differentiate between return on total assets (ROA), return on equity (ROE), and earnings per...
Define and differentiate between return on total assets (ROA), return on equity (ROE), and earnings per share (EPS). Which measure is probably of greatest interest to owners? Why?
I need excel formulas to Calculate Return on Equity (ROE) and Return on Assets (ROA) from...
I need excel formulas to Calculate Return on Equity (ROE) and Return on Assets (ROA) from the data below. After analyzing the data, what recommendations are there to make? Assets - Total Cash and Short-Term Investments Current Liabilities - Total Liabilities and Stockholders Equity - Total Liabilities - Total Net Income (Loss) Operating Activities - Net Cash Flow Receivables - Total Sales/Turnover (Net) Interest and Related Expense - Total 1432.2480 119.3610 344.4380 1432.2480 903.6070 132.1280 177.6250 25.6770 2683.6770 17.5570 1576.2080...
Hanan corporation has the following relationships: Return on assets (ROA) 4%, Return on equity (ROE) 8%....
Hanan corporation has the following relationships: Return on assets (ROA) 4%, Return on equity (ROE) 8%. What is the equity ratio? Select one: a. 25% b. 40% c. 50% d. 60% IF CDD has sales revenues of $300,000 and inventory turnover 5x. Find the company ending inventories? Select one: a. $300,000 b. $50,000 c. $240,000 d. $60,000 Find the price of a corporate bond which has a par value of $1000 and coupon payment is 5% and yield is 8%....
What is the current year's return on assets (ROA)?
How to find cash? and calculate total assets? ROA= NI/Total assetsCategoryPrior yearCurrent yearAccounts payable41,40045,000Accounts receivable115,200122,400Accruals16,20013,500Additional paid in capital200,000216,660Cash??????Common Stock @ par value37,60042,000COGS131,400178,190.00Depreciation expense21,60022,533.00Interest expense16,20016,634.00Inventories111,600115,200Long-term debt135,000138,345.00Net fixed assets377,719.00399,600Notes payable59,40064,800Operating expenses (excl. depr.)50,40060,541.00Retained earnings122,400136,800Sales255,600337,945.00Taxes9,90018,616.00What is the current year's return on assets (ROA)?Answer Format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))
2 Banks merge. What is the impact over ROA (return on average assets) when the commercial...
2 Banks merge. What is the impact over ROA (return on average assets) when the commercial offices of both are within the new balance sheet?  
Required: Return on Equity (ROE) is used, and some say “abused” when measuring the financial performance...
Required: Return on Equity (ROE) is used, and some say “abused” when measuring the financial performance of a firm. What are your thoughts on ROE specifically, as well as other financial ratios generally, when forming an opinion on the financial performance of a firm? Write at least 250 words. Please don't copy from anywhere. Write in your own words.
Required: Return on Equity (ROE) is used, and some say “abused” when measuring the financial performance...
Required: Return on Equity (ROE) is used, and some say “abused” when measuring the financial performance of a firm. What are your thoughts on ROE specifically, as well as other financial ratios generally, when forming an opinion on the financial performance of a firm? Write at least 300 words. Please don't copy from anywhere. Write in your own words.
Under what conditions would a firm’s return on common equity (ROCE) be equal to its return...
Under what conditions would a firm’s return on common equity (ROCE) be equal to its return on net operating assets (RNOA)? Answer in paragraph form.
2. Carefully explain what the impact would be on a bank’s ROA and ROE from increased...
2. Carefully explain what the impact would be on a bank’s ROA and ROE from increased use by a bank of off-balance sheet (OBS) activities.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT