[amp_mcq option1=”return on turnover” option2=”return on stock” option3=”return on assets” option4=”return on equity” correct=”option4″]<\/p>\n
The correct answer is D. return on equity.<\/p>\n
Return on equity (ROE) is a measure of a company’s profitability. It is calculated by dividing net income by shareholders’ equity. ROE is a good measure of how well a company is using its equity to generate profits.<\/p>\n
Profit margin is a measure of how much profit a company makes on each dollar of sales. It is calculated by dividing net income by revenue. Profit margin is a good measure of a company’s pricing power and efficiency.<\/p>\n
Assets turnover is a measure of how efficiently a company uses its assets to generate sales. It is calculated by dividing revenue by average total assets. Assets turnover is a good measure of a company’s asset management efficiency.<\/p>\n
Equity multiplier is a measure of how much debt a company uses to finance its assets. It is calculated by dividing total assets by shareholders’ equity. Equity multiplier is a good measure of a company’s financial risk.<\/p>\n
The formula for ROE is:<\/p>\n
ROE = Net income \/ Shareholders’ equity<\/p>\n
The formula for profit margin is:<\/p>\n
Profit margin = Net income \/ Revenue<\/p>\n
The formula for assets turnover is:<\/p>\n
Assets turnover = Revenue \/ Average total assets<\/p>\n
The formula for equity multiplier is:<\/p>\n
Equity multiplier = Total assets \/ Shareholders’ equity<\/p>\n
Therefore, profit margin multiplied by assets turnover multiplied by equity multiplier is used to calculate return on equity.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”return on turnover” option2=”return on stock” option3=”return on assets” option4=”return on equity” correct=”option4″]<\/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-59777","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n