A bank's ROE ____ account for its financial leverage. A bank's ROA ____ account for its financial leverage.
A)does; does
B)does; does not
C)does not; does not
D)does not; does

Question

Quizplus · Accepted Answer

ROE (Return on Equity) accounts for a bank's financial leverage because it measures the return generated on shareholders' equity, which is affected by the use of debt (leverage). ROA (Return on Assets), however, measures the return generated on the bank's assets and does not directly account for the bank's financial leverage.

A Bank's ROE ____ Account for Its Financial Leverage