A Firm Has an ROE of -2%, a Debt/equity Ratio

question 64

Multiple Choice

A firm has an ROE of -2%, a debt/equity ratio of 1.0, a tax rate of 0%, and an interest rate on debt of 10%.The firm's ROA is

• A)2%.
• B)4%.
• C)6%.
• D)8%.
• E)None of the options

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Definitions:

Express Warranty

A clear, affirmative promise or guarantee by a seller about the quality or functionality of a product or service.

Basis of the Bargain

A term from contract law referring to the essential facts and terms agreed upon by the parties, influencing their decision to enter into a contract.

Negligent Design

A legal claim that occurs when a product is poorly designed, leading to injury or damage due to the manufacturer's failure to foresee risks.

Manufacturer

An individual or company that makes goods or products from raw materials by using various forms of labor, machinery, and equipment.