When a company borrows more money how are the debt to equity and return on equity affected assuming income before interest and taxes remain the same? Debt to Equity Return on Equity

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Quizplus · Accepted Answer

When a company borrows more money, the debt increases, leading to a higher debt to equity ratio. If income before interest and taxes remains the same, the interest expense increases, reducing net income and thus decreasing the return on equity.

When a Company Borrows More Money How Are the Debt