Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is ____ than Bank B's. Bank A's return on equity is ____ than Bank B's.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower

Question

Quizplus · Accepted Answer

Bank A's return on assets is lower because it has more assets with the same net income. Bank A's return on equity is lower because it has a higher capital ratio, meaning more equity relative to its net income.

Banks a and B Have the Same Net Income