Directions: Click the Case Link above and use the information provided in Brook Plumbing Supply Company, Inc., Part B$,$ to answer this question:

Which of the following statements best describes the trend in Brook Plumbing's leverage and capital structure for the three years provided in the financial statements? $($Carry your calculation to two decimal places.$)$

Debt to equity has remained constant as new debt has been offset by retained earnings.

$\backslash$times Debt to equity has increased each year, indicating higher leverage due to greater levels of debt and insufficient equity capital.

Debt to equity has remained constant as new debt has been offset by retained earnings; however, total liabilities are nearly twice the amount of equity.

Debt to equity has improved each year as a result of retained earnings and reduction in long$-$term debt; however, total liabilities are still nearly twice the amount of equity.