Return on Equity (ROE)indicates a Return to the Owners of the Firm

question 33

Essay

Return on equity (ROE)indicates a return to the owners of the firm and is closely followed by investment analysts.What 4 deficiencies does this ratio have?

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Definitions:

Good

An item or service that satisfies a want or need and is available for sale or exchange in the market.

Maximizing Utility

The economic principle that individuals or firms seek to achieve the highest level of satisfaction or benefit from their choices.

Marginal Utility

The increased enjoyment or value gained by a consumer from consuming an extra unit of a good or service.

Price

The amount of money required to purchase a good or service, which is determined by supply and demand.