Compute ROA, ROE and ROFL and Interpret the Effects of Leverage

Basic income statement and balance sheet information is given below for six different cases. For each case, the assets are financed with a mix of non-interest-bearing liabilities, 10% interest-bearing liability and stockholders' equity.

Case A B C D E F Average assets $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Non-interest bearing liabilities 0 O 0 0 200 200 Interest-bearing liabilities 0 250 500 500 0 300 Average shareholders' equity 1,000 750 500 500 800 500 Earnings before interest and taxes (EBIT) 120 120 120 80 100 80