Select the Incorrect Statement Regarding the Return on Equity (ROE)

question 49

Multiple Choice

Select the incorrect statement regarding the return on equity (ROE) measure.

• 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.

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Definitions:

Decision-making Condition

A scenario or set of circumstances that necessitates a choice between alternatives.

Unstructured Problem

A problem that lacks clear definition and solution paths, often requiring creative and critical thinking for resolution.

Technological Problem

Issues or challenges related to the application or development of technology within various contexts, often requiring specific solutions or innovations.

Production Possibilities Frontier

A graphical representation showing the maximum quantity of different goods that a society can produce with its available resources and technology, assuming efficient use of resources.