ROE

question 85

Multiple Choice

ROE

• A)stands for return on earnings.
• B)focuses on the company's profitability based on the book value of the common and preferred equity.
• C)remains relatively stable among different companies and different industries.
• D)is calculated by dividing net income minus preferred dividends by average common equity.
• E)evaluates how effectively the company uses resources provided by the bondholders

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Definitions:

Diminishing Marginal Utility

The principle that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in demand for a good that results from a change in its price, making consumers more likely to purchase more of a less expensive alternative or less of a more expensive one.

Demand Curves

Graphs showing the relationship between the price of a good and the quantity demanded by consumers, typically downward-sloping.