This question came up in accounting and I am having some doubts as to the correctness of the answer given.
What is the effect on ROA when an interest payment is made on bonds issued at a discount?
ROA is defined as [NI+Int Exp*(1-t)] / Ave total assets
I understand that the interest expense is greater than the cash payment and that you must amortize a potion of the bond discount, but I seem to be able to make a case that ROA can increase and/or decrease.
Let me know what the minds can put together.