Under what situation will return on equity be higher than return on investment? a. When assets exceed liabilities. b. When the debt to equity ratio is greater than 1.0. c. When net income is higher than it was in the previous year. d. When a company earns more on borrowed money than the interest it must pay.

Under what situation will return on equity be higher than return on investment? a. When assets exceed liabilities. b. When the debt to equity ratio is greater than 1.0. c. When net income is higher than it was in the previous year. d. When a company earns more on borrowed money than the interest it must pay.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Under what situation will return on equity be higher than return on investment?

a. When assets exceed liabilities.

b. When the debt to equity ratio is greater than 1.0.

c. When net income is higher than it was in the previous year.

d. When a company earns more on borrowed money than the interest it must pay.

Formula Formula ROI (%) = Net Income Principal Amount × 100

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