Which of the following statements best describes the term "return on equity" (ROE)?
A)ROE is a measure of the effectiveness of the entity in using the assets provided by owners to generate net income.
B)ROE is the measure of the amount of dividends that have been returned to the shareholders.
C)ROE is measure of how effective the entity is at controlling expenses.
D)ROE is the measure of the risk and liquidity of an entity.

Question

Quizplus · Accepted Answer

Return on equity (ROE) is a financial ratio that measures how effectively a company is using the capital provided by its shareholders to generate profits. ROE shows the net income a company has earned as a percentage of the total equity invested by shareholders. Therefore, option A is the most accurate description of ROE.

Which of the Following Statements Best Describes the Term "Return