A company employing debt financing tends to show a higher ROE than ROA. Why is this...
A company employing debt financing tends to show a higher ROE than ROA. Why is this so and what does this mean?
Homework Answers
Asset= Debt+ Equity
Return on equity= Net Income/ Equity
Return on Asset= Net Income/ Asset = Net Income/ (Debt + Equity)
We can contemplate from above that, if the company is employing more debt, then return will be high on equity because the impact of debt will be shown in ROA instead of ROE. This means the company has higher returns for Equity as compared to outsiders.
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A company employing debt financing tends to show a higher ROE
than ROA. Why is this...
What are some reasons why ROE is higher than ROA?
What are some reasons why ROE is higher than ROA?
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5. When comparing the ROAS and ROES, we concluded that the ROE > ROA as long...
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what info does those financial ratios show? comparing ROE ROA
current ratio
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what info does those financial ratios show? comparing ROE ROA
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ROA 10.5 7.55 4.84 3.29 2.14 0.56 2016 2017 2018 -2.36 -6.62 Air Asia X Cebu Asiana Airlines ROE 33.28 24.84 21.58 24.66 9.67 2016 2017 2018 -18.94 -38.6 Air Asia X Cebu Asiana Airlines Current ratio 0.74 0.75 0.71 0.65 0.54 0.5 0.45 0.37 0 0 0.34 2016 2017 2018 Air Asia X Cebu Asiana Airlines
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