[amp_mcq option1=”return on earning power” option2=”return on investment” option3=”return on common equity” option4=”return on interest” correct=”option3″]<\/p>\n
The correct answer is C. return on common equity.<\/p>\n
Return on common equity (ROE) is a measure of how profitable a company is relative to the amount of equity it has invested. It is calculated by dividing net income available to common stockholders by common equity.<\/p>\n
Net income available to common stockholders is the amount of net income that is available to be distributed to common stockholders after all other expenses and dividends have been paid. Common equity is the total amount of equity that is invested in the company by common stockholders.<\/p>\n
ROE is a useful measure of profitability because it shows how much profit a company is able to generate from the money that its owners have invested. A high ROE indicates that a company is efficient at using its equity to generate profits.<\/p>\n
However, ROE can be misleading if it is not compared to other companies in the same industry. This is because the amount of equity that a company has invested can vary depending on the industry. For example, a company in a capital-intensive industry, such as manufacturing, will have a higher amount of equity invested than a company in a service industry.<\/p>\n
Therefore, it is important to compare ROE to other companies in the same industry to get a better understanding of how profitable a company is.<\/p>\n
Here are brief explanations of the other options:<\/p>\n
[amp_mcq option1=”return on earning power” option2=”return on investment” option3=”return on common equity” option4=”return on interest” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-47299","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n