Final answer:
Increasing debt is not an action that typically boosts a subpar Return on Equity (ROE), because it potentially lowers shareholders' equity without an increase in net income. Actions like reducing expenses, expanding profit margins, and buybacks can improve ROE.
Step-by-step explanation:
The action that is NOT likely to boost a subpar Return on Equity (ROE) is B) Increasing debt. ROE is a measure of financial performance calculated by dividing net income by shareholders' equity. When a company increases its debt without a proportionate increase in its net income, it may negatively impact the ROE as the equity base decreases. Instead, reducing expenses (A), expanding profit margins (C), and buying back company shares (D) are actions that can help improve ROE. Reducing expenses or expanding profit margins can directly increase net income, which boosts ROE. Buying back shares reduces the number of outstanding shares, which can increase earnings per share (EPS) and potentially lead to a higher ROE if net income is held constant. If one owned a small firm contemplating major expansion, the choice between borrowing (debt financing) and issuing stock (equity financing) would depend on several factors. Borrowing could be attractive for maintaining control over the company, while issuing stock might be preferred to avoid repayment pressures and interest expenses associated with loans. Each action and financing method carries its own set of advantages and trade-offs, which would be carefully considered against the company's goals, financial situation, and market conditions.