Question: 1. What's the effect on return on equity (ROE) by raising capital through debt? In the response, explain the relationship of ROCE = ROA *

1. What's the effect on return on equity (ROE) by raising capital through debt? In the response, explain the relationship of ROCE = ROA * Common Earnings Leverage * Financial Structure Leverage. Explain the numerator and denominator for the ratios. How do these capture the cost of debt as well as the amount of debt?

2. When a bank makes a loan they will use account reports to evaluate compliance with the loan and loan terms. Provide at least one example of a term where accounting would play a role/be involved.

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