To increase the return on stockholders' equity, management could increase the ____.
A) current ratio
B) price-to-earnings ratio
C) dividend yield
D) equity multiplier

Question

Quizplus · Accepted Answer

The equity multiplier is a measure of financial leverage, or the amount of debt a company has relative to its equity. By increasing the equity multiplier, a company can increase its return on equity (ROE) as long as the return on assets (ROA) is higher than the cost of debt. However, increasing the current ratio, price-to-earnings ratio, or dividend yield may not directly increase ROE.

To Increase the Return on Stockholders' Equity, Management Could Increase