Question: What will be the impact on Return on Equity (ROE) if following ratios change? Explain how changes in each ratio will affect ROE. a. Tax

What will be the impact on Return on Equity (ROE) if following ratios change? Explain how changes in each ratio will affect ROE.

a. Tax burden and Interest burden go down, financial leverage increases, EBIT margin and total asset turnover remain unchanged

b. Financial leverage decreases, net profit margin and total asset turnover remain unchanged

c. EBIT margin falls, tax burden increases, interest burden remains unchanged, total asset turnover and financial leverage increase

d. Return on asset falls, net profit margin increases, financial leverage falls

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