Which One of the Following Is NOT an Advantage of Using

question 46

Multiple Choice

Which one of the following is NOT an advantage of using ROE as a goal?

• A) ROE is highly correlated with shareholder wealth maximization.
• B) ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknesses.
• C) ROE does not consider risk.
• D) All of the above are advantages of using ROE as a goal.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, offering them limited liability and the ability to raise funds by selling shares.

Net Income

The profit remaining after all costs, expenses, and taxes have been subtracted from total revenue.

Allowances

Funds set aside or discounts offered to account for various factors such as potential returns, defective goods, or customer satisfaction initiatives.

Income-Sharing Ratio

An agreed upon proportion used to distribute profits or losses among partners in a partnership.