Question

One way to maintain a high partner return on equity is to:

Select one:

a. Increase partnership assets by accumulating more cash.

b. Reduce partnership liabilities by paying off debt.

c. Pay out large amounts or earnings to partners in the form of drawings.

d. Increase partner's equity accounts by having partners make additional contributions.

Answer 1

c.Payout large amounts or earnings to partners in form of drawings.

partner return on equity = (partner net income / average partner equity)

Paying out a large amounts in form of drawings will reduce the denominator amount of average partner equity, which will see that the partner return on equity is a higher number.