Return on equity will increase if the _________________.
A) proﬁt margin decreases
B) return on assets increases
C) debt-equity ratio decreases
D) accounts receivable turnover increases
E) total asset turnover decreases

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated by dividing net income by shareholder's equity. If return on assets (ROA) increases, it means that the company is generating more income from its assets, and this will increase the net income available to be paid to shareholders. Therefore, ROE will also increase. None of the other options listed will necessarily increase ROE.

Return on Equity Will Increase If the _________________