When Will ROE Equal ROC

question 65

Multiple Choice

When will ROE equal ROC?

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

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, typically in the form of cash payments or additional shares.

Dividend Cuts

A reduction in the dividend payments issued by a company, which can signify financial distress or a reallocation of funds.

Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder equity.

NPV Projects

Projects assessed using Net Present Value, a method that calculates the difference between the present value of cash inflows and outflows over a period of time to evaluate and compare investments.