answered question
If A Firm's ROE (Return On Common Equity) Is Low And Management Wants To Improve It, Explain How Using More Debt Might Provide A Solution?
Suppose two firms have the same amount of assets, pay the same interest rate on their debt, have the same basic earning power (BEP), and have the same tax rate.  However, one firm has a higher debt ratio.  If BEP is greater than the interest rate on debt, the firm with the higher debt ratio will also … Read more