Final answer:
Whenever ROA is positive, ROE is higher than ROA due to the multiplier effect of financial leverage, which amplifies profitability by considering debt alongside equity.
Step-by-step explanation:
The student's question addresses the relationship between Return on Assets (ROA) and Return on Equity (ROE) in finance. Whenever ROA is positive, ROE is always higher than ROA because of the "multiplier" effect of the financial leverage. This effect occurs because ROE amplifies the profitability measure by taking into account the company's debt in addition to its equity.
The use of financial leverage means that a firm is using debt to finance its assets which can increase the return on equity as long as the return on assets exceeds the cost of the debt.