When will ROE equal ROC?
A) whenever the firm has equal debt and equity financing.
B) whenever the firm has no interest payments on debt.
C) whenever the value of the firm's assets exceeds the value of its equity.
D) ROE will never equal ROC.

Question

Quizplus · Accepted Answer

ROE (Return on Equity) will equal ROC (Return on Capital) when there are no interest payments on debt, as interest affects the net income used in ROE calculation but not the operating income used in ROC calculation.

When Will ROE Equal ROC