If the interest rate on debt is higher than the ROA, then by using debt a firm's ROE will ________.

A) decrease
B) increase
C) not change
D) change but in an indeterminable manner

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.

ROA

Return on Assets, a financial ratio that shows the percentage of profit a company earns in relation to its overall resources.

ROE

Return On Equity; a measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.