If a financial analyst wants to measure the relationship between profitability and the investment made by stockholders, the analyst 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 (ROE) ratio measures the profitability of a company in relation to the equity invested by stockholders. ROE is calculated by dividing net income by the average shareholder equity. This ratio helps analysts determine how well a company is using its investors' money to generate profits. Therefore, choice A is the best option to measure the relationship between profitability and the investment made by stockholders.

If a Financial Analyst Wants to Measure the Relationship Between