The Audit Significance of the Financial Ratio, return on Common

question 45

Multiple Choice

The audit significance of the financial ratio, return on common equity is:

• A) this financial ratio provides a reasonableness test of the entity's proportion of equity that may be compared with prior years' experience or industry data.
• B) an unexpected increase or decrease in the depreciation expense as a percent of depreciable assets may indicate an error in calculating depreciation.
• C) an unexpected increase in this financial ratio may indicate the failure to record or capitalize depreciable assets.
• D) this financial ratio provides a test of the entity's ability to generate earnings to cover the cost of service debt.
• E) this financial ratio provides a reasonableness test of shareholders' equity given the company's earnings and financing structure.

---

Definitions:

Initiative

The ability to assess and initiate things independently, often leading to new ideas or actions without being directed by others.

Leadership Labyrinth

A metaphor for the complex challenges and barriers that leaders, especially women, face in rising to top positions in organizations.

Glass Ceiling

A metaphorical barrier preventing minorities and women from advancing to higher positions in corporations and organizations due to bias and organizational structures.

Alternative Metaphor

An alternative metaphor provides a novel or unconventional way to describe an idea or concept, allowing for different perspectives or insights.