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%.
Correct Answer:
Verified
Correct Answer:
Verified
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