The Board of Directors Is Dissatisfied with Last Year's ROE

question 99

Multiple Choice

The board of directors is dissatisfied with last year's ROE of 15%. If the profit margin and asset turnover ratio remain unchanged at 8% and 1.25, respectively, by how much must the leverage ratio (i.e., assets/equity) increase to achieve 20% ROE?

• A) .50%
• B) 5%
• C) 16.67%
• D)33.33%

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Definitions:

Humerus

The long bone in the upper arm that runs from the shoulder to the elbow, connecting with muscles and joints to facilitate arm movement.

Articulates

Pertains to how bones connect or join together at joints to allow for movement.

Radius

One of the two major bones in the forearm, located on the lateral side (thumb side) of the forearm.

Distal Location

Refers to parts of the body or structures located farthest from the point of attachment or reference.