Series 79 practice questionmediumProfitability Ratios
Which of the following would NOT increase a company’s ROE, assuming all other factors remain constant?
- AIncreasing financial leverage
- BImproving net profit margin
- CIncreasing asset turnover
- DIssuing more common stock✓ Correct answer
Explanation
Why D — Issuing more common stock
Issuing more stock increases equity, lowering ROE if net income is unchanged. B, C, and D would all increase ROE per the DuPont analysis.
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