Increases in ROE solely due to rising debt levels (that is, a rising equity multiplier) are generally viewed favorably.

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Increases in ROE due to rising debt levels indicate that the company is taking on more financial risk. While debt can enhance returns, it also increases the company's financial leverage and potential for financial distress, which is not generally viewed favorably without considering the context of how the borrowed funds are being used to generate returns.

Increases in ROE Solely Due to Rising Debt Levels (That