A company has a net loss for the year of $(10,000,000) and a deficit (negative equity) of $(1,000,000). ROE will be
A) 1000% indicating an exceptional opportunity.
B) 1000% and meaningless.
C) -1000% indicating that the company is in dire straits.
D) 10.

Question

Quizplus · Accepted Answer

ROE (Return on Equity) is calculated as Net Income divided by Shareholder's Equity. With a net loss of $(10,000,000) and a deficit (negative equity) of $(1,000,000), the ROE would be -1000%. However, since equity is negative, the ROE is not meaningful in this context.

A Company Has a Net Loss for the Year of $(10,000,000)