If Brewster's produces a return on assets of 14 percent and also a return on equity of 14 percent,then the firm
A)has no net working capital.
B)is using its assets as efficiently as possible.
C)has no debt of any kind.
D)also has a current ratio of 14.
E)has an equity multiplier of 1.4.

Question

Quizplus · Accepted Answer

When a firm's return on assets equals its return on equity, it indicates that the firm has no debt, as the equity multiplier (which reflects financial leverage) is 1.

If Brewster's Produces a Return on Assets of 14 Percent