When a Company's ROE Is Greater Than Its ROA for a Given

question 125

Multiple Choice

When a company's ROE is greater than its ROA for a given time-period, it could be that

• A) the company could borrow at an after-tax rate that was higher than the rate earned by investing in assets
• B) the company could borrow at an after-tax rate that was less than the rate earned by investing in assets.
• C) the company has no debt
• D) the level of debt has no impact on the ROA

---

Definitions:

Two-Factor Theory

A theory suggesting that emotional experience is the result of physiological arousal and cognitive labeling of the arousal.

James-Lange Theory

A theory of emotion that proposes physical reactions to external stimuli lead to emotional responses.

Guilty Knowledge Test

A psychological assessment method used to determine if a person has knowledge about a crime that would only be known to the perpetrator.

Fraternal Twins

Siblings born at the same time as a result of two separate eggs being fertilized, leading to genetic dissimilarity and typically different gender possibilities.