Return on equity is a ratio that:
A) is calculated by dividing profit plus preferred dividends by average common shareholders' equity.
B) cannot be calculated if the company has preferred shares in addition to common shares.
C) shows the relationship between net earnings and retained earnings.
D) shows the relationship between net earnings and average shareholders' equity.

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated by dividing net income by average shareholders' equity, showing how effectively a company uses the equity from its shareholders to generate profit.

Return on Equity Is a Ratio That