Which of the Following Statements Regarding the Return on Equity

question 93

Multiple Choice

Which of the following statements regarding the return on equity (ROE) measure is incorrect?

• A) ROE is used to measure the profitability of the firm in relation to the amount invested by stockholders.
• B) ROE equals net income divided by average total stockholders' equity.
• C) ROE is affected by a company's use of leverage.
• D) 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.

---

Definitions:

Threshold

The point or level at which something begins or changes.

Dendrites

The branched extensions of a neuron that receive signals from other neurons.

Insulate Neurons

The process of covering neurons with myelin, a fatty substance that speeds up the transmission of electrical signals along nerve cells.

Integrate Information

The process of combining data from different sources and making sense of it, often to form a comprehensive understanding or to make decisions.