The Return on Equity Ratio Usually Is Computed As

question 24

Multiple Choice

The return on equity ratio usually is computed as:

• A)Net income divided by average total assets.
• B)Net income divided by average total stockholders' equity.
• C)Gross profit divided by average total stockholders' equity.
• D)Net income less preferred dividends,divided by average common stockholders' equity.

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Definitions:

Sensitivity Analysis

A financial modeling technique that determines how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

Break-Even Point

The point at which total costs and total revenues are equal, meaning the business is not making a profit or loss, a crucial figure for financial planning and management.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating a company’s fixed versus variable costs.

Variable Costs

Charges that adjust in direct proportion to the manufacturing output or the quantity of sales.