Which of the following measure reveals how much profit a company generates with the money shareholders have invested?
Correct answer: C. Return on Equity
- A. Profit Margin
- B. Return on Assets
- C. Return on Equity
- D. Debt-Equity Ratio
Explanation
Return on equity measures profit earned for each unit of shareholders' invested equity. Profit margin relates profit to sales, while return on assets relates profit to total assets.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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