Return on Equity (ROE) Is Calculated By

question 70

Multiple Choice

Return on equity (ROE) is calculated by:

• A) subtracting liabilities from assets.
• B) adding the book value and the market price of a stock.
• C) dividing net income by shareholders' equity.
• D) multiplying assets by a selected number.
• E) deducting taxes from dividends.

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Definitions:

Operating Costs

Operating Costs are expenses associated with the day-to-day functions of an organization, excluding direct material and labor costs.

Tax Rate

The rate at which a person or company is taxed by the state.

Profitability Index

A financial tool used to evaluate the desirability of an investment or project by dividing the present value of future cash flows by the initial investment.

Net Present Value

A calculation that determines the present value of future cash flows, discounted at a specific rate, to evaluate the profitability of an investment.