A company that is only able to earn a small profit margin and achieve low asset intensity or turnover can still earn an adequate return on equity by:

Question

Quizplus · Accepted Answer

Employing a high degree of leverage (using a high level of debt relative to equity) can help a company with low profit margins and low asset turnover to achieve an adequate return on equity (ROE). This is because leverage amplifies the returns generated on equity capital, albeit at the cost of higher risk.

A Company That Is Only Able to Earn a Small