Question

Return on equity is calculated by:

A) Subtracting liabilities from assets.
B) Adding book value and market price of a stock.
C) Dividing net income by shareholder's equity.
D) Multiplying assets with a selected number.
E) Deducting taxes from dividends.

Answer 1

Return on equity (ROE) is calculated by dividing net income by shareholder's equity.

Step-by-step explanation:

Return on equity (ROE) is calculated by dividing net income by shareholder's equity. ROE measures a company's profitability by showing how much profit a company generates from the money invested by shareholders. It is expressed as a percentage and is commonly used to evaluate a company's financial performance and its ability to generate a return for shareholders.