Aside from ROE being calculated as Net income/Shareholders' equity, it can be expressed as a product of:
A) ROA and book value per share.
B) ROA and leverage.
C) ROA and profit margin.
D) leverage and book value per share.

Question

Quizplus · Accepted Answer

ROE can be expressed as a product of Return on Assets (ROA) and leverage. This is because ROE measures a company's profitability relative to equity, while ROA measures profitability relative to total assets. Leverage, defined as the ratio of total assets to shareholders' equity, links the two by showing how much of the assets are financed by equity.

Aside from ROE Being Calculated as Net Income/Shareholders' Equity, It