Question: (Q2): Answer questions d, e, f, g: d. How does return on common equity (ROCE) be used to assess the effect of financial leverage on

(Q2): Answer questions d, e, f, g:

d. How does return on common equity (ROCE) be used to assess the

effect of financial leverage on profitability?

e. How does short-term liquidity risk differ from long-term solvency risk,

and what financial ratios are helpful in assessing these two

dimensions of credit risk?

f. How do you use the cash flow statement information when assessing credit risk?

g. How can we interpret the results of an analysis of profitability and risk?

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