Select the Incorrect Statement Regarding the Return on Equity (ROE)measure

question 9

Multiple Choice

Select the incorrect statement regarding the return on equity (ROE) measure.

• A)ROE is used to measure the profitability of the firm in relation to the amount invested by stockholders.
• B)A company's ROE is lower than its return on investment because ROE does not consider that part of the business that is financed by debt.
• C)ROE is affected by a company's use of leverage.
• D)ROE equals net income divided by total stockholders' equity.

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Definitions:

Price Elasticity

The degree to which the demand or supply of a product changes in response to a change in price.

Crude Oil

A naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials.

Production

The process of creating goods or services by combining labor, land, and capital to generate value.

Total Revenues

The overall amount of money generated by a business, organization, or individual from its activities, before any expenses are subtracted.