In 2016, the improvement in ABC's return on equity occurred because
A) ABC used more debt than in 1994.
B) ABC lowered its expenses in 1995 and was, therefore, more profitable.
C) ABC utilized its total assets more efficiently in 1995.
D) None of the above explain the improvement in ABC's return on equity.

Question

Quizplus · Accepted Answer

Using more debt can increase return on equity by leveraging the equity base, assuming the return on assets exceeds the cost of debt.

In 2016, the Improvement in ABC's Return on Equity Occurred