Net income divided by equity: how much profit a company earned relative to the funds provided by shareholders. It equals ROA (return on assets) multiplied by financial leverage (total assets ÷ equity).
Japanese name: ROE(自己資本利益率)
ROE (return on equity) appears in 1 practice question across 1 topic, including Business Strategy and Accounting Basics.
Answer: C. 15%
ROE is an indicator of how much net income a company earned relative to its equity, the funds provided by shareholders: 12 ÷ 80 = 15%. The ratio to total assets, 12 ÷ 200 = 6%, is ROA (return on assets), which shows how efficiently all assets, including those funded by liabilities, are used. ROE equals ROA multiplied by financial leverage (total assets ÷ equity); here the financial leverage is 200 ÷ 80 = 2.5 times, so ROE is 2.5 times ROA.
ROE is an indicator of how much net income a company earned relative to its equity, the funds provided by shareholders: 12 ÷ 80 = 15%.
A company had net income of ¥12 billion, equity of ¥80 bill…As an Amazon Associate I earn from qualifying purchases.
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