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

question 7

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) Leverage ratio must increase by .5.
• B) Leverage ratio must increase by 5.
• C) Leverage ratio must increase by 16.67%.
• D) Leverage ratio must increase by 33.3%.

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Definitions:

Sensations

The initial process by which our sensory receptors and nervous system receive and represent stimulus energies from our environment.

Hippocrates

Often called the "Father of Medicine," a Greek physician of the Age of Pericles, who is credited with establishing medicine as a profession through ethical and systematic practices.

Scientific Psychology

The branch of psychology that uses scientific methods to study and understand human behavior and cognitive processes.

Freud

Psychoanalysis, a method devised by Austrian neurologist Sigmund Freud, focuses on treating psychopathology through conversational therapy between patients and psychoanalysts.