CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

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
Correct Answer: B

The formula for computing return on equity is net income divided by equity. Return on equity will be greater than return on investment when a company has financial leverage greater than one.

User Contributed Comments 7

User Comment
S/A=A Turnover
julescruis thanks gina
godz if you got this wrong dont show up at the exam center
Drzewes GIna:


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?
You need to log in first to add your comment.