Which one of the following is NOT an advantage of using return on equity (ROE) as a goal?
A) ROE is highly correlated with shareholder wealth maximization.
B) ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknesses.
C) ROE does not consider risk.
D) All of the above are advantages of using ROE as a goal.

Question

Quizplus · Accepted Answer

ROE as a goal does not consider risk, which can be a significant disadvantage. While ROE is highly correlated with shareholder wealth maximization and allows management to break down performance, it is important for management to consider risk as they set goals and make decisions.

Which One of the Following Is NOT an Advantage of Using