Return on equity can be expressed mathematically as (return on assets) x (total assets/stockholders' equity).

Question

Quizplus · Accepted Answer

Return on equity (ROE) can indeed be expressed as the product of return on assets (ROA) and the financial leverage multiplier (total assets/stockholders' equity), according to the DuPont analysis formula. This formula breaks down ROE into component parts to analyze a company's profitability and financial leverage.

Return on Equity Can Be Expressed Mathematically as (Return on Assets)