Suppose Firm A and Firm B have a debt/(Total Assets) ratio of 20% and 80%, respectively, and return on equity (ROE) of 10% and 30%, respectively.

Which firm has a higher profitability of assets, measured by return on assets (ROA)?

Is Firm B better than Firm A, or vice versa?

Answer rating: 100% (QA)

To compare the profitability of assets between Firm A and Firm B we can calculate their respective r... View the full answer