Return on equity (ROE)primarily measures which of the following?

Question

Quizplus · Accepted Answer

Return on equity (ROE) measures the ability of a company to generate profit or net income for its common shareholders based on the amount of shareholder equity invested in the business. It is a measure of how effectively a company is using its equity and is sometimes referred to as "return on net worth." Option A is describing a different ratio, which is return on assets (ROA). Option B does not take into account the specific equity of the common shareholders. Option D refers to the ability to earn profit for preferred shareholders, which is not the focus of ROE.

Return on Equity (ROE)primarily Measures Which of the Following