Refer to the data below for the Adelsman Company.

The income tax rate was 40 percent in each year and 100,000 common shares were outstanding throughout the period.
a Did the company's profitability increase over the 3-year period? How can you tell? (Hint: Compute the rate of return on assets.)
b Did risk increase? How can you tell?
c Are shareholders better off in year 3 than in year 1 ?

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Year 1 Year 2 Year 3 Rate of Return on Common Shareholders' Equity... 8% 10% 11% Earnings per Share. $3.00 $4.00 $4.40 Times Interest Charges Earned 10 5 4 Debt-Equity Ratio (liabilities/all equities) 20% 50% 60% "Net Income/Total Interest Expense