Which of the following has the most significant influence on return on equity?
A) Common dividends
B) Principal payments
C) Accruals
D) Operating income

Question

Quizplus · Accepted Answer

Operating income directly affects the numerator of the return on equity formula (net income), and therefore has the most significant influence on return on equity. Common dividends and principal payments affect the amount of equity available, but not the return calculation itself. Accruals may affect net income, but not necessarily in a way that would significantly impact return on equity.

Which of the Following Has the Most Significant Influence on Return