This year Andrews achieved an ROE of
This year Andrews achieved an ROE of 16.8%. Suppose the Board of Directors of Andrews mandates that management take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, and Assets remain the same next year, what effect would you expect this new Leverage policy will have on Andrews ROE?
Andrews ROE will remain the same.
Andrews ROE will increase.
Andrews ROE will decrease.