Question

(Ch. 10)

Return On Equity (ROE) relates __________ ___________ to the average ___________________ equity

Answer 1

Return on Equity (ROE) relates net income to the average shareholders' equity and measures a company's profitability.

Step-by-step explanation:

Return on Equity (ROE) relates net income to the average shareholders' equity.

ROE measures a company's profitability by showing how efficiently it generates profits from the shareholders' investments. It helps investors and analysts assess the performance and potential of a company.

For example, if a company has a ROE of 20%, it means that for every dollar of shareholders' equity, the company generates 20 cents in net income.