Question

Which of the following will result from an increase in return on equity? Question 9 options: A) Decrease in fixed costs B) Decrease in cash on the balance sheet C) Increase in the tax rate D) Increase in fixed costs

Answer 1

Correct Answer is option A

Return on Equity = Net Income / shareholders Equity
If fixed cost decrease net income will increase, therefore increase in the return on equity.
Increase in tax rate tends to reduce the net income, Return on equity will decrease
Increase in fixed cost tends to decrease the Net Income, therefore dercrease the return on equity.

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