Return on Equity (ROE) =
ANet income ÷ total assets
BNet income ÷ average shareholders' equityCORRECT
CRevenue ÷ assets
DProfit ÷ revenue
CFAFinancial Reporting
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
ROE measures profitability relative to equity — key DuPont component (margin × turnover × leverage).
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →
Practice more Financial Reporting questions
CFA Financial Reporting has thousands more questions like this — with Worked answers on every one.