ITPEC IP April 2024 Question 69
ITPEC IP April 2024 — Question 69 of 100
The E in ROE stands for Equity. ROE is Return on Equity, a profitability ratio that compares profit attributable to owners with the equity invested in the company. A common form is net income ÷ average shareholders' equity × 100%. It indicates how effectively management generates earnings from owners' capital.
Answer (d)
Why not others:
- (a) Earnings contributes to the numerator but is not the E represented in the acronym
- (b) Employee is unrelated to this financial profitability ratio
- (c) Enterprise appears in other business terms but not in ROE
Key rule: ROE measures return relative to shareholders' equity; ROA instead measures return relative to total assets.
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