💼 Pre-MBA Exam Prep

Return on equity (ROE) is calculated as:

A Revenue divided by assets
B Net income divided by average shareholders equity
C Gross profit divided by sales
D Operating income divided by debt

✓ Correct Answer: Option B

ROE = Net Income / Average Shareholders Equity. Measures how efficiently equity capital generates profit. DuPont analysis decomposes ROE into margin × turnover × leverage.

💡 Why is B) the correct answer?

The correct answer to the question "Return on equity (ROE) is calculated as:" is Option B: Net income divided by average shareholders equity.

The other options — A) Revenue divided by assets, C) Gross profit divided by sales, D) Operating income divided by debt — are incorrect for this Pre-MBA Exam Prep question. As explained above: ROE = Net Income / Average Shareholders Equity. Measures how efficiently equity capital generates profit. DuPont analysis decomposes ROE into margin × turnover × leverage.

📚 About This Pre-MBA Exam Prep Practice Question

This 2-level Pre-MBA Exam Prep question from the Accounting topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free Pre-MBA Exam Prep practice test or use flashcards for spaced repetition review.

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