A company that has no debt will have its ROA equal to its ROE.

Question

Quizplus · Accepted Answer

When a company has no debt, its assets are entirely financed by equity. Thus, the sum of its liabilities and equity is equal to its equity. Therefore, the formula to calculate ROA, which is net income divided by total assets, becomes net income divided by equity. This is the same formula used to calculate ROE, which is net income divided by equity. Consequently, when a company has no debt, its ROA will be the same as its ROE.

A Company That Has No Debt Will Have Its ROA