ageec 242, chapter 5 - part 2. if a farm business has no interest expense in a given year and no debt…

ageec 242, chapter 5 - part 2. if a farm business has no interest expense in a given year and no debt (liabilities), how would roa and roe compare to one another? 1 point. roa would be greater than roe. roe would be greater than roa. roa and roe would be equal. $2,123,225 - roe = $23,326 ÷ $2,123,225 = 1.1%. am i right? skip for now. submit answer. skip for now

ageec 242, chapter 5 - part 2. if a farm business has no interest expense in a given year and no debt (liabilities), how would roa and roe compare to one another? 1 point. roa would be greater than roe. roe would be greater than roa. roa and roe would be equal. $2,123,225 - roe = $23,326 ÷ $2,123,225 = 1.1%. am i right? skip for now. submit answer. skip for now

Answer

Explanation:

Step1: Recall ROA and ROE formulas

ROA (Return on Assets) = Net Income / Total Assets. ROE (Return on Equity) = Net Income / Shareholders' Equity. When there is no debt (liabilities), Total Assets = Shareholders' Equity (since Assets = Liabilities+Equity and Liabilities = 0).

Step2: Compare ROA and ROE

Since Net Income is the same in both formulas and Total Assets = Shareholders' Equity when there is no debt, ROA = ROE.

Answer:

ROA and ROE would be equal