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Using more debt lowers profits and thus the ROA. Why doesn’t debt have the samenegative effect on the ROE?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 5QTD

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Using more debt lowers profits and thus the ROA. Why doesn’t debt have the same
negative effect on the ROE?

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