BD Hydro increases its operating eﬃciency such that costs decrease while sales remain constant. As a result, given all else constant, the:

Question

Quizplus · Accepted Answer

As costs decrease while sales remain constant, BD Hydro's net income will increase. This means that the return on equity (ROE) will increase as net income is the numerator in the ROE ratio. The other options are incorrect as the return on assets (ROA) and profit margin are both calculated using net income in the numerator and would increase along with ROE. The equity multiplier and price-earnings ratio are not directly affected by changes in costs and sales.

BD Hydro Increases Its Operating Eﬃciency Such That Costs Decrease