The firm projected its proforma of financial statements using AFN method and finds that next year its AFN is $2 million. Its total asset this year is $40 million and its net sales this year is $50 million. The CFO has decided to finance its entire projected AFN through issuing common stock. What would you expect to happen in next years financial ratio based on AFN method if we expect its net income remains constant? WHY?

A. Its return on equity will go down.

B. Its times interest earned will go down

C. Its equity multiplier will go up.

D. Its quick ratio will go down.

E. Its current ratio will go down.