Stanwick, Inc. wants to measure the relationship between profitability and the investment made by stockholders. To measure this Stanwick should use the:
A) return on equity ratio.
B) earnings per share.
C) net profit margin percentage.
D) operating margin percentage.

Question

Quizplus · Accepted Answer

The return on equity ratio measures the profitability of a company in relation to the investment made by stockholders. It is calculated by dividing net income by shareholder equity. Therefore, this would be the best choice for Stanwick, Inc. to measure the relationship between profitability and investment made by stockholders.