What impact did the analysts mistake have

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Reference no: EM133265520

Preferred equity Cathy Careless reformulated the financial statements for a company and mistakenly treated preferred shareholders' equity as common shareholders' equity. The company's balance sheet showed $4 million of preferred equity and $40 million of common equity this year and the year before. The company did not pay preferred dividends or common dividends. She calculated a Return on Common Shareholders' Equity (ROCE) of 8% and a Net Borrowing Cost (NBC) of 5%. What impact did the analyst's mistake have on the following ratios:

a. Return on Common Shareholders' Equity (ROCE)

Circle one: INCREASE DECREASE NO EFFECT Not enough Information

b. Net Borrowing Cost (NBC)

Circle one: INCREASE DECREASE NO EFFECT Not enough Information

Reference no: EM133265520

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