Problem

Many large corporations, such as General Motors, have written off large amounts of their...

Many large corporations, such as General Motors, have written off large amounts of their nonperforming (or poorly performing) assets as they have shrunk their operations. What is the impact of these asset write-offs on the future return on assets, future return on common equity, and future financial leverage ratios? What impact would you expect these write-offs to have on the market value of the firm’s equity securities? Why?

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