ROE is equal to ROA when the firm has no debt.

Question

Quizplus · Accepted Answer

Return on equity (ROE) is equal to return on assets (ROA) when a firm has no debt, as in this case the firm's assets are funded entirely by equity. ROA measures how efficiently a company is using its assets to generate profit, while ROE measures the return on equity, which takes into account the amount of debt used to finance the assets. If a firm has debt, its ROE will typically be higher than its ROA, as debt amplifies returns for equity holders, but at the same time increases their risk.

ROE Is Equal to ROA When the Firm Has No