Elsie wants to calculate her return on equity but has forgotten the formula.You tell her that return on equity equals
A)net income divided by owner's equity.
B)owner's equity divided by net income.
C)total assets divided by owner's equity.
D)owner's equity divided by total assets.

Question

Quizplus · Accepted Answer

Return on equity is calculated by dividing the net income (or profit) by owner's equity. This gives us a percentage measure of how much profit is being generated by the funds that owners have invested in the company. Choice A is the correct formula for calculating return on equity.

Elsie Wants to Calculate Her Return on Equity but Has