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:

Risky Behaviour

Actions undertaken by individuals or organizations that expose them to potential harm or significant loss.

Bonuses

Additional compensation given to employees as a reward for their performance or for meeting certain objectives.

Cost Reduction

Cost reduction involves strategies and actions taken to decrease expenses and improve efficiency in a business or operation, enhancing overall profitability.

Canadian Organizations

Entities or groups operating within Canada, bounded by its legal, cultural, or geographic context.