Explanation For A Firm’s High ROE


1. Which of the following is the least likely explanation of a firm’s high ROE?

A. The firm is growing.
B. The firm is able to find investment opportunities that are very profitable.
C. The firm has very efficient use of its assets.
D. The firm enjoys high sales margins.

2. One way Enron manipulated its financial statements was to sell assets at inflated prices to other firms, while giving a promise to buy back those assets at a later date. The incoming cash was recorded as revenue, but the promise to buy back the assets was not disclosed. Which of the following is one of the ways that such a transaction is deceptive?

A. The assets should have been listed on the balance sheet as long-term assets.
B. Cash raised by selling assets should not be recorded as revenue.
C. The cash raised should have been recorded as short-term loans.
D. The off-balance sheet promises to repurchase assets should have been disclosed in management discussion and analysis (MD&A) or notes to the financial statement.


These short questions belong to Finance. The 1st question is about finding the least likely explanation for a firm’s high ROE. The 2nd question is about a company that manipulated its financial statements to sell its assets at inflated prices.

Total Word Count 32

Download Full Solution


  • HWA

    this is a very good website

  • HWA

    I have 50 questions for the same test your page is showing only 28

  • HWA

    hi can you please help or guide me to answer my assignments. thanks

  • HWA

    hi can anyone help or guide me to my assignments. thanks

  • HWA

  • HWA

    This solution is perfect ...thanks

  • HWA

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA

    Perfect bank of solution. 

  • HWA

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA

    works fine.