When Will Return on Equity Equal Return on Capital

question 47

Multiple Choice

When will return on equity equal return on capital?

• A)whenever the firm has equal debt and equity financing.
• B)whenever the firm has no interest payments on debt.
• C)whenever the value of the firm's assets exceeds the value of its equity.
• D)ROE will never equal ROC.

---

Definitions:

Personal Liability

The legal responsibility of an individual to settle debts or obligations from their own assets, rather than those protected by a corporation or limited liability entity.

Business Debts

Obligations that a business incurs as a result of operating activities, including loans, accounts payable, and any other form of borrowed money.

No Personal Liability

A legal principle that protects individual actors within a corporation or legal entity from bearing personal financial responsibility for the entity's liabilities.

Agency Relationships

A legal arrangement where one party, the agent, acts on behalf of another party, the principal, in transactions with third parties.