For 2006 Continental Airlines was able to report ROE of 106% compared to 7.3% for Southwest Airlines. While Southwest achieved higher profitability, Continental had a much higher level of
A) operating leverage.
B) financial leverage.
C) receivables turnover.
D) working capital.

Question

Quizplus · Accepted Answer

Continental Airlines' high ROE compared to Southwest Airlines, despite lower profitability, suggests that Continental used a higher level of financial leverage, which amplifies ROE.

For 2006 Continental Airlines Was Able to Report ROE of 106