If the company’s Return upon Equity (ROE) is low as well as government wants to urge it, insist how regulating some-more debt financing competence help.
Well according to the book
ROE = sum assets/common equity
which would prove which some-more debt financing would reduce ROE, so it doesnt have clarity to me
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ROE is actually Net Income/Equity. Taking out more debt doesn’t decrease your equity, but could allow you to make more money (do more advertising, open another branch, etc.) so by making more money even with the same equity your ROE improves.