Which of the following is the LEAST likely explanation for a firm's high ROE?
A)The firm has very efficient use of its assets.
B)The firm is growing.
C)The firm is able to find investment opportunities that are very profitable.
D)The firm enjoys high sales margins.

Question

Quizplus · Accepted Answer

High Return on Equity (ROE) primarily reflects a company's efficiency in generating profits from every unit of shareholders' equity. While efficient use of assets, profitable investment opportunities, and high sales margins directly contribute to higher ROE by increasing net income, growth in itself does not guarantee a high ROE. Growth could be driven by increased sales or expansion, which might not necessarily translate into higher efficiency or profitability ratios like ROE.

Which of the Following Is the LEAST Likely Explanation for a Firm's