Final answer:
A $50,000 capital contribution increases equity, potentially raising ROI and decreasing the debt ratio, as liabilities remain unchanged.
Step-by-step explanation:
The student's question pertains to the impact of a $50,000 capital contribution on a company's Return on Investment (ROI) and debt ratio, assuming liabilities remain unchanged. Considering that ROI is a measure of profitability and debt ratio indicates the proportion of a company's assets financed through debt, the capital contribution will affect these metrics.
The correct answer is D. Increase; only equity impacts ratios, liabilities are irrelevant. When a company receives a $50,000 capital contribution, this increases the owner's equity but does not change the total amount of liabilities. As a result, the equity portion of the balance sheet increases, which can lead to an increased ROI since there is now more equity to potentially yield returns. The debt ratio, defined as liabilities divided by total assets, will decrease because the total assets have increased due to the additional equity, while liabilities have stayed the same.