If a Firm Has an ROA of 8%, a Debt/equity

question 52

Multiple Choice

If a firm has an ROA of 8%, a debt/equity ratio of 0.5, its ROE is ________.

• A)4%
• B)6%
• C)8%
• D)12%

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Definitions:

Business Risk

Business risk involves the potential for financial loss in a company's operations, stemming from factors like market fluctuations, regulatory changes, or operational failures.

Insurance Policy

An insurance policy is a legal contract between an insurer and the insured, outlining the terms under which the insurer agrees to compensate the insured for specific losses in exchange for a premium.

Transfer Risk

The uncertainty associated with cross-border financial transactions, particularly the risk that a foreign debtor will default on its obligations due to external factors like currency restrictions.

Laissez-faire Capitalism

An economic philosophy advocating for minimal government intervention in the market.