Which of the following is a common effect when return on common stockholders' equity is greater than return on total assets?
A)Financial leverage is being used effectively.
B)The company has no debt.
C)The company's profit is declining.
D)Earnings per share will be extremely large.

Question

Quizplus · Accepted Answer

When the return on common stockholders' equity is greater than return on total assets, it indicates that the company is effectively using financial leverage. This means that the company is using debt to increase its return on equity, which is a common strategy for companies to increase their profitability. This does not necessarily mean that the company has no debt or that its profit is declining, nor does it guarantee that earnings per share will be extremely large.

Which of the Following Is a Common Effect When Return