Question

A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%. If the company then issues additional shares of common stock for cash, which of the following is a correct statement?

A) The debt-to-assets ratio will decrease and the return on equity ratio will decrease.

B) The debt-to-assets ratio will increase and the return on equity ratio will increase.

C) The debt-to-assets ratio will not change and the return on equity ratio will not change.

D) The debt-to-assets ratio will decrease and the return on equity ratio will increase.

Answer

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