When would the return on equity (ROE) definitely equal the return on assets (ROA)?
A) Whenever a firm has no long-term debt.
B) Whenever a firm's debt-to-equity ratio is equal to one.
C) Whenever a firm's long-term debt ratio is equal to zero.
D) Whenever a firm's return on equity is equal to 100%.
E) Whenever a firm's total debt ratio is equal to zero.

Question

Quizplus · Accepted Answer

ROE equals ROA when there is no debt, meaning the firm is entirely equity-financed. This occurs when the total debt ratio is zero.

When Would the Return on Equity (ROE) Definitely Equal the Return