Return on Equity Is a Ratio That

question 123

Multiple Choice

Return on equity is a ratio that:

• A) is calculated by dividing profit plus preferred dividends by average common shareholders' equity.
• B) cannot be calculated if the company has preferred shares in addition to common shares.
• C) shows the relationship between net earnings and retained earnings.
• D) shows the relationship between net earnings and average shareholders' equity.

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Definitions:

Equity Investment

The act of putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit, primarily through the ownership of equity.

Separately Funded

A financial arrangement where specific projects or objectives are funded independently from an organization's main operating budget.

Dedicated Capital

Refers to funds allocated for a specific purpose or investment, typically involving long-term projects or goals.

Capital Structure

The particular combination of debt and equity used by a firm to finance its overall operations and growth.