BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant. As a result,given all else constant,the:
A) return on equity will increase.
B) return on assets will decrease.
C) profit margin will decline.
D) equity multiplier will decrease.
E) price-earnings ratio will increasE.

Question

Quizplus · Accepted Answer

Increasing operating efficiency will lead to a decrease in costs which will result in an increase in net income. As net income increases, return on equity (ROE) will also increase because ROE is calculated as net income divided by total equity.

BGL Enterprises Increases Its Operating Efficiency Such That Costs Decrease