If a Firm's ROA and ROE Are Equal, It Can

question 46

Multiple Choice

If a firm's ROA and ROE are equal, it can be concluded that the firm is:

• A) losing money.
• B) liquid enough to pay some extra dividends.
• C) financed by all equity.
• D) financed by a high proportion of debt.

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Definitions:

Conversion Cost

Conversion Cost refers to the combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished products.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all items available for sale during the period.

Equivalent Units

A concept used in cost accounting to express the amount of work done on units of inventory in terms of fully completed units.

Conversion Costs

The combined costs of direct labor and manufacturing overheads, which are incurred to convert raw materials into finished goods.