Which of the Following Choices Would Be Guaranteed to Increase

question 18

Multiple Choice

Which of the following choices would be guaranteed to increase a firm's ROE if the ROA is currently 10% and the leverage ratio equals 1?

• A) Decrease the leverage ratio
• B) Increase the debt burden from its current level
• C) Decrease assets from the current level
• D) Decrease the debt burden from its current level

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Definitions:

Utility Function

A utility function is a representation of preferences over a set of goods and services, showing the level of satisfaction or utility that different bundles of goods provide to a consumer.

Consumption

The use of goods and services by households or individuals for personal needs or to derive utility.

Income

Financial earnings generated through employment, investments, or other sources, contributing to an individual's purchasing power.

Utility Function

A mathematical representation that ranks consumer preferences over a set of goods or services, often leading to an optimal choice.