Question

Why do equity holders care more about roe than about​ roa?

a. roe measures how efficiently the bank is being​ run, while roa measures how much equity holders are earning.

b. a change in roe indicates a change in the safety of the​ investment, while a change in roa does not.

c. roe measures how much equity holders are​ earning, while roa measures how efficiently the bank is being run.

d. a higher roe indicates a higher level of liquidity for the​ investment, while a higher roa does not?

Answer 1

C. ROE measures how much equity holders are​ earning, while ROA measures how efficiently the bank is being run.

ROE = net income/ shareholder's equity

ROA= net income/total assets