If shareholders want to know how much profit a firm is making on their entire investment in the firm, the shareholders should look at the:
A)profit margin.
B)return on assets.
C)return on equity.
D)equity multiplier.
E)earnings per share.

Question

Quizplus · Accepted Answer

Return on equity (ROE) measures the amount of profit a firm generates relative to the amount of shareholder equity invested in it. It is calculated as net income divided by shareholder equity. ROE is the best choice to determine how much profit a firm is making on a shareholder's entire investment in the firm because it takes into account both the profitability of the company and the amount of equity invested by the shareholder.

If Shareholders Want to Know How Much Profit a Firm