Holding all other variables constant, which of the following would increase return on equity? An increase in ____.
A)the tax rate
B)the equity ratio (equity/total assets)
C)total assets
D)total asset turnover

Question

Quizplus · Accepted Answer

Total asset turnover is the ratio of sales to total assets, which measures how efficiently a company is using its assets to generate revenue. An increase in total asset turnover would increase return on equity as it would generate more revenue for a given amount of equity. Increasing the tax rate would decrease return on equity, while increasing the equity ratio and total assets would have a mixed effect on return on equity as they would increase the amount of equity and total assets, respectively, but also potentially lower asset turnover.

Holding All Other Variables Constant, Which of the Following Would