An Increase in Which of the Following Must Increase the Return

question 5

Multiple Choice

An increase in which of the following must increase the return on equity, all else constant?

• A) Total assets and sales
• B) Net income and total equity
• C) Total asset turnover and debt-equity ratio
• D) Equity multiplier and total equity
• E) Debt-equity ratio and total debt

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Definitions:

Charitable Contributions

Money or goods donated to nonprofit or charitable organizations, often eligible for tax deductions.

Dividend Income

Money that a company pays to its shareholders out of its profits.

AMT Income

Alternative Minimum Tax (AMT) income is a method of calculating taxable income according to parallel tax rules to ensure that certain taxpayers pay at least a minimum amount of tax.

Corporation

A legal entity recognized by law as separate from its owners, capable of holding assets, incurring liabilities, and conducting business.