Return on Equity Increases When the Expected Rate of Return

question 39

True/False

Return on equity increases when the expected rate of return from new assets is higher than the rate of interest expense on the debt financing.

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Definitions:

Cost Method

An accounting approach used to value inventory or investments based on the original purchase cost, without adjusting for market changes.

Foreign Exchange Rates

The value at which one currency can be exchanged for another.

Political Conditions

The current state of the government and political climate that can affect economic and business environments.

Economic Conditions

The state of the economy at a given time, including factors like inflation, unemployment rates, and economic growth.