Hotel & Leisure, Retail and Telecommunication has a significant direct relationship where

Return on Asset increases as Debt to Equity Ratio increases due to the subsector’s long
term investments. Debt increases to finance long term assets that produces lesser
depreciation expense which increases the profitability of the company. In addition, since
this industry is more on long term assets, acquisition of another asset is not necessary
for the next periods. Asset decreases in effect of the depreciation which reduces the book
value specifically on Property and Equipment. Debt still increases, however, it is only to
finance the regular operations of the business (general, administrative and selling
expenses) and this will still produce higher income for the company because of lesser
expenses incurred due to non-acquisition of additional assets.

Information Technology showing a significant relationship has an indirect relationship

between Debt to Equity Ratio and Return on Asset. Compared to the other subsectors,
there is a great impact on Debt to Equity Ratio to its Return on Asset in this industry
whereby, when there is an aggressive increase in DER Ratio, an equivalent decrease in
its Return on Asset that results to a significant relationship between the two variables.
This is because this industry needs updates regularly and since this industry involves
computers and systems (data storages, etc.), it has a shorter useful life which leads to a
high depreciation expense that will result to a low profit. Debt increases to fund equipment
such as Computers, Software and etc., and its upgrade which will, in effect, increase
asset, however, decreases income because of its relatively high expenses.