The Rate of Return on Shareholders' Equity Indicates

question 57

Multiple Choice

The rate of return on shareholders' equity indicates

• A)the margin of safety provided to creditors.
• B)the extent of "trading on the equity" or financial leverage.
• C)profitability without regard to how resources are financed .
• D)the effectiveness of employing resources provided by owners.

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Definitions:

Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.

Operating Expenses

Costs associated with running the day-to-day operations of a business, such as rent, utilities, and payroll, but excluding costs related to production.

Revenue

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Denominator

The bottom number in a fraction that shows into how many equal parts the whole is divided.