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Basic Question 4 of 5

Which of the following formulas is the formula for computing return on equity (ROE)?

A. Net income divided by assets
B. Net income divided by equity
C. Sales divided by assets
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User Contributed Comments 7

User Comment
Gina NI/A=ROI
NI/E=ROE
A/E=Fin.Leverage
S/A=A Turnover
julescruis thanks gina
godz if you got this wrong dont show up at the exam center
Drzewes GIna:

NI/A is ROA

ROI = NI/ Equity + total debt

I am almost :) sure.
endlessfin1te isn't Asset = Equity + Debt anyway?
johntan1979 ROA = ROI
yenweic But wouldnt ROA < ROE if u make a loss? Hence the explanation is not entirely correct?
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I used your notes and passed ... highly recommended!
Lauren

Lauren

Learning Outcome Statements

explain the role of equity securities in the financing of a company's assets

contrast the market value and book value of equity securities

compare a company's cost of equity, its (accounting) return on equity, and investors' required rates of return

CFA® 2025 Level I Curriculum, Volume 3, Module 4.