Explaining Why the ROE (Return on Equity)ratio Has Changed Requires

question 48

Multiple Choice

Explaining why the ROE (return on equity) ratio has changed requires an examination of the:

• A) asset efficiency ratios and debt ratios.
• B) profitability ratios and the market performance ratios.
• C) return on assets and financial risk.
• D) profitability ratios and the asset efficiency ratios.

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Definitions:

Useful Life

The estimated period over which an asset is expected to be functional and economically useful.

Commercial Substance

Involves a situation where the future cash flows of a business are expected to change significantly as a result of a transaction.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been expensed since it was put into use.

Recorded Cost

The cost of an asset as it appears in a company's books or financial statements, reflecting the original cost of acquisition.