Create a forecast based on the current income statement under the assumption, that next years sales will change, that management is able to reduce fixed costs and that the company is able to reduce its asset base. What would be the effect on its ROE?

Income Statement

1) Create a forecast based on the current income statement under the assumption, that next years sales will change, that management is able to reduce fixed costs and that the company is able to reduce its asset base. What would be the effect on its ROE?

2) How would ROE equity change if the company were to employ more financial leverage. Is this always wise? What else do you expect would change if the company increase its ROE?