What Does Return on Equity Measure

question 103

Multiple Choice

What does return on equity measure?

• A) The amount of pre-tax profit earned for each dollar invested
• B) The amount of profit earned for each share of stock
• C) The amount of profit earned for each dollar of previous profit retained in the business
• D) The amount of profit earned for each dollar invested
• E) The amount of pre-tax profit earned for each share of stock

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Definitions:

External User

Individuals or entities outside of a company who use its financial information, such as investors, creditors, and regulatory agencies.

Federal Government

The national government of a federal country, which holds the authority to govern matters that affect the country as a whole.

Managerial Accounting

The process of identifying, measuring, analyzing, and interpreting accounting information for internal use by management for planning, decision making, and control.

External Users

Individuals or entities outside of a company (such as investors, creditors, and regulators) who use its financial statements and reports for decision-making purposes.