An increase in which of the following must increase the return on equity, all else constant?
A) Total assets and sales
B) Net income and total equity
C) Total asset turnover and debt-equity ratio
D) Equity multiplier and total equity
E) Debt-equity ratio and total debt

Question

Quizplus · Accepted Answer

An increase in total asset turnover indicates a more efficient use of assets to generate sales, and an increase in the debt-equity ratio (equity multiplier) implies a higher use of debt relative to equity, both of which can increase the return on equity (ROE) by leveraging assets more effectively to generate profits.

An Increase in Which of the Following Must Increase the Return