Given a bank's return on assets,the higher the bank capital,the higher the return for the owners of the bank.

Question

Quizplus · Accepted Answer

A bank's return on assets (ROA) is a measure of how efficiently it uses its assets to generate profit. The return for the owners of the bank (return on equity or ROE) is influenced by the bank's leverage, which is the ratio of its total assets to its equity (capital). Higher bank capital means lower leverage, which can actually lead to a lower return on equity if the return on assets remains constant, because the earnings are spread over a larger amount of equity.

Given a Bank's Return on Assets,the Higher the Bank Capital,the