A financial institution with a low ROA can achieve a relatively high ROE through:
A)high leverage.
B)low leverage.
C)high owner's capital.
D)tax swap.
E)None of the options is correct.

Question

Quizplus · Accepted Answer

A financial institution with a low ROA can achieve a relatively high ROE through high leverage, as ROE is calculated by dividing net income by owner's equity. By increasing leverage, the financial institution can increase its net income, which in turn increases its ROE. However, it is important to note that high leverage can also increase the institution's risk and financial instability.

A Financial Institution with a Low ROA Can Achieve a Relatively