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Define effect of recognizing this lawsuit in 2012

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Err Company has a major lawsuit against them for unsafe products. It recognizes a huge liability in 2012 of $300M. The effect of this liability is to decrease stockholders' equity by 50%. In 2013, the effect of recognizing this lawsuit in 2012, all else being equal in 2013, is: 

a) Return on net operating assets will increase dramatically. 

b) Return on net operating assets will decrease dramatically. 

c) Return on equity will increase dramatically. 

d) Return on equity will decrease dramatically.

Reference no: EM131135652

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