Return on net operating assets will always be greater than or equal to the pretax return on equity.

Question

Quizplus · Accepted Answer

The return on net operating assets (RNOA) is the ratio of operating income to net operating assets, while the pretax return on equity (ROE) is the ratio of pre-tax earnings to total equity. It is possible for the RNOA to be less than the ROE if the company has a high level of financial leverage (i.e. debt) and its pre-tax earnings are significantly higher than its operating income.

Return on Net Operating Assets Will Always Be Greater Than