Question 1
When would the "return on equity" equal the "return on assets"?
◦ Whenever the debt to equity ratio is one
◦ Whenever the debt ratio is zero
◦ Whenever a firm has positive net worth
◦ Whenever the firm has positive net worth and positive net income
Question 2
Which of the following is a TRUE statement about the Du Pont equation?
I. | It is a mathematical identity. |
II. | It provides a causal explanation for changes (or differences) in ROE. |
III. | It is used to analyze chemical companies. |
◦ I only
◦ II only
◦ III only
◦ I and II
◦ II and III