If a firm produces a 10% return on assets and also a 10% return on equity,then the firm:
A) has no debt of any kind.
B) is using its assets as efficiently as possible.
C) has no net working capital.
D) also has a current ratio of 10.
E) has an equity multiplier of 2.

Question

Quizplus · Accepted Answer

A 10% return on equity indicates that the firm is not financed by any debt, as the return on equity is equal to the return on assets. This means that all assets are funded entirely by equity, hence the answer is option A.

If a Firm Produces a 10% Return on Assets and Also