Return on equity compares
A)the market price of the company's stock to its dividend policy.
B)a company's earnings to the dividends paid for the year.
C)the profits of a company to the investment made by its shareholders.
D)the profits of a company to the selling price of each share of stock.

Question

Quizplus · Accepted Answer

Return on equity (ROE) is a financial metric that measures how efficiently a company is using its shareholder's equity to generate profits. It is calculated by dividing the company's net income by its shareholder equity. ROE compares the profits of a company to the investment made by its shareholders. Therefore, option C is the correct answer. Option A is incorrect because it refers to the market price of a company's stock and its dividend policy, which is not related to ROE. Option B is incorrect because it only compares earnings and dividends for a specific year, and not the entire investment history. Option D is incorrect because it relates the profits of a company to the selling price of one share of stock, instead of the total investment made by shareholders.

Return on Equity Compares