A high return on equity ratio is generally a good indication for a business; however, this ratio is highly affected by debt and may not be an accurate measurement of management effectiveness.

Question

Quizplus · Accepted Answer

A high return on equity (ROE) indicates that a company is effectively generating income relative to its equity. However, since ROE can be inflated by high levels of debt, it might not always accurately reflect management's effectiveness in using the company's assets to generate profit.

A High Return on Equity Ratio Is Generally a Good