Companies with a lower ROA and higher leverage will have a lower ROE than companies with a higher ROA and lower leverage.

Name: Companies with a lower ROA and higher leverage will have a lower ROE than companies with a higher ROA and lower leverage.
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Question

Quizplus · Accepted Answer

ROE (Return on Equity) is influenced by both ROA (Return on Assets) and leverage. Higher leverage can increase ROE even if ROA is lower, due to the magnifying effect of debt on equity returns.

Companies with a Lower ROA and Higher Leverage Will Have