A firm that has no debt will have its return on assets (ROA) equal to its return on equity (ROE).

Question

Quizplus · Accepted Answer

When a firm has no debt, all of its assets are financed by equity, which means there are no interest expenses to reduce net income. Consequently, the return on assets (ROA), which measures the company's net income relative to its total assets, will be equal to the return on equity (ROE), which measures the company's net income relative to its shareholder equity.

A Firm That Has No Debt Will Have Its Return