The return on owner's equity ratio does not add interest expense back to net income, because net income is a measure of a business' profits available to owners.

Question

Quizplus · Accepted Answer

The return on owner's equity ratio measures the profitability available to the owners, so it uses net income (which already accounts for interest expense) without adding back interest expense, as this expense is considered a cost of financing, not a cost of operations directly attributable to the owners' equity.

The Return on Owner's Equity Ratio Does Not Add Interest