Which One of the Following Will Increase the Return on Equity

question 26

Multiple Choice

Which one of the following will increase the return on equity?

• A) increase in the corporate tax rate
• B) decrease in fixed costs
• C) issuance of debt to purchase equipment
• D) increase in variable costs per unit
• E) decrease in net sales

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Definitions:

Compound Interest

Interest earnings calculated on the base principal along with any interest that has previously accumulated from past periods on that principal.

Straight-Line Depreciation

A method of calculating the depreciation of an asset which spreads the cost evenly across the useful life of the asset.

Average Rate of Return on Investment

An investment's return expressed as an annualized percentage, calculating how much an investment has gained compared to its initial cost.

Compound Interest

The interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan.