Accounting · Financial Statement Analysis
Which of the following situations would most likely lead to a decline in the Return on Equity (ROE), even when Return on Assets (ROA) remains constant?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Increase in equity through fresh share issue without proportional earnings growth✓
- 2Increase in debt ratio while profit margin remains stable
- 3Reduction in tax rate while keeping EBIT constant
- 4Decrease in total assets with no change in earnings
Correct answer
Increase in equity through fresh share issue without proportional earnings growth
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