The owners of a company change their decision to finance by issuing more shares.Instead,they take out a long-term note with their bank.What will be the repercussions of this change in decision?
A) return on assets will increase
B) return on assets will be unaffected
C) financial risk will be lower
D) financial risk will be unaffected

Question

Quizplus · Accepted Answer

The return on assets (ROA) is calculated as net income divided by total assets. Changing the financing method from equity to debt does not directly affect the net income or total assets, so ROA remains unaffected.

The Owners of a Company Change Their Decision to Finance