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Question
The table below shows some data for Key Biscuit Company:
| Year | Tax Burden | Interest Burden | ROS | ATO | Leverage | ROE |
| 2010 | 0.60 | 0.70 | 0.40 | 0.45 | 1.20 | 9.07% |
| 2011 | 0.60 | 0.55 | 0.40 | 0.45 | 1.45 | 8.61% |
| 2012 | 0.60 | 0.45 | 0.40 | 0.45 | 1.65 | 8.02% |
What must have caused the firm's ROE to drop?
A) The firm began using more debt as a percentage of financing.
B) The firm began using less debt as a percentage of financing.
C) The compound leverage ratio was less than 1.
D) The operating ROA was declining.
Answer
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