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Basic Question 1 of 7
Which of the following formulas is the formula for computing return on equity (ROE)?
B. Net income divided by equity
C. Sales divided by assets
A. Net income divided by assets
B. Net income divided by equity
C. Sales divided by assets
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 | Look at the explanation given in the answer... the only way ROE > ROI is when the equity multiplier or leverage is > 1. In other words, ROI = NI/A = ROA |
| ldfrench | @godz, el oh el plz don't be mean (i mean it plz) |
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Tamara Schultz
Learning Outcome Statements
demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components;
CFA® 2024 Level I Curriculum, Volume 3, Module 21.