Return on equity is calculated by:

Question

Quizplus · Accepted Answer

Return on equity (ROE) is a ratio that measures the profit generated by a company's equity. To calculate ROE, divide the net income by average shareholders' equity during a given period. Option A is incorrect because dividing profit by total revenue gives you the profit margin, not ROE. Option C is incorrect because working capital is not relevant to calculating ROE. Option D is incorrect because dividing dividends by shareholders' equity gives you the dividend yield, not ROE.

Return on Equity Is Calculated By