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:

Chronological Age

The exact age of an individual, measured in years, months, and days, from the date of birth.

Basal Metabolism

Use of energy to maintain vital functions.

Physical Capacity

The maximum level of physiological activity that an individual can sustain, often influenced by factors like strength, endurance, and flexibility.

Stress-Induced Stamina

The capacity to endure stress while maintaining performance, which can improve with exposure to controlled levels of stress.