Return on Equity

question 60

Multiple Choice

Return on equity

• A) is an activity ratio.
• B) shows how much after-tax profits are generated by each dollar of sales.
• C) is referred to by the acronym ROI.
• D) measures the rate of return on the book value of shareholders' total investment in the company.
• E) is a leverage ratio.

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Definitions:

Loanable Funds

The funds available for borrowing in the financial markets, influenced by savings, government policies, and financial institutions' lending criteria.

Market

The arena in which buyers and sellers come together to trade goods, services, or financial instruments, establishing prices through supply and demand.

Usury Law

Legislation that sets the maximum interest rate that can be charged on loans, to prevent lenders from imposing excessively high rates.

Market Rate

The prevailing interest rate available in the market for loans or the rate at which other financial instruments are priced, often influenced by the supply and demand for money.