When Would the Return on Equity (ROE) Definitely Equal the Return

question 336

Multiple Choice

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

• A) Whenever a firm has no long-term debt.
• B) Whenever a firm's debt-to-equity ratio is equal to one.
• C) Whenever a firm's long-term debt ratio is equal to zero.
• D) Whenever a firm's return on equity is equal to 100%.
• E) Whenever a firm's total debt ratio is equal to zero.

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Definitions:

Compensating Variation

An economic concept describing the amount of additional income that would leave someone as well off after a price change as they were before it.

Price of Earrings

The amount of money required to purchase earrings, which can vary based on materials, brand, and design.

Utility Function

An analytical model that illustrates how buyers prioritize various combinations of products based on the amount of pleasure or utility derived from those combinations.

Consumer's Surplus

The variance between the aggregate sum consumers intend and have the means to pay for a good or service, and the sum they actually pay.