If shareholders want to know how much proﬁt a ﬁrm is making on their entire investment in the ﬁrm, the shareholders should look at the:
A) Proﬁt margin.
B) Return on assets.
C) Return on equity.
D) Equity multiplier.
E) Earnings per share.

Question

Quizplus · Accepted Answer

Return on equity (ROE) measures how much profit a firm generates for each dollar of shareholder equity. It provides shareholders with insight into how effectively the firm is using their investment to generate profit.

If Shareholders Want to Know How Much Proﬁt a ﬁRm