... expected profitability of the book value, and leverage affects profitability. So our empirical analysis investigates the effect of leverage on both profitability and price-to-book ratios. Or, stated ... components of book value must imply different profitability. Indeed, thetwo analyses (of profitability and price-to-book ratios) are complementary. FINANCIAL STATEMENT ANALYSIS OF LEVERAGE 537 ... HarvardUniversity, Rice University, University of California at Berkeley, University of Houston, University of Iowa, University of Southern California, University of Texasat Austin, and Washington...