Mehal Mechanics Ltd's Leverage Ratio Moved from 15

question 12

Multiple Choice

Mehal Mechanics Ltd's leverage ratio moved from 15.3% to 9% between 2005 and 2007. No common or preferred shares were issued in the year. Which of the following situations is most likely to achieve this result?

• A) Higher net income and a decrease in the dividend payout ratio
• B) Higher net income and increase in the dividend payout ratio
• C) Lower return on capital employed and a higher debt to equity ratio
• D) Higher return on capital employed and a higher debt to equity ratio
• E) Higher net income regardless of dividend payout ratio

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