Suppose you are an Ag Lending Agent at a community bank. You are looking over an application for a loan and here is what you find: a farm whose leverage is 0.25, whose ROE is 0.09, whose ATO is 0.41, and whose ROA on all owned capital is 0.08.
Which of the following conclusions is reasonable for you, the lender to make regarding the farm's creditworthiness?
Group of answer choices
All of these are reasonable conclusions for a lender to make
Because their leverage is "good", borrowing marginally more money can increase their profitability, thus raising both ROA and ROE further
Since ROE > ROA, owned assets are producing more returns than the interest on borrowed capital is taking, thus equity is growing from surplus returns
ROA on owned assets is in the "strong" range, thus making the owned assets competitive against alternative investments
The farm's rate of profit is only okay - about 0.19 - so the percent profit per dollar of value produced could be improved