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A company has net income of $14,600,000. Stockholders' equity was $47,550,000 at the beginning of the year and $68,150,000 at the end of the year. The company does not have any preferred stock outstanding. What is the company’s return on equity (ROE) during the year?

Respuesta :

According to question, the return on equity (ROE) is 0.25 .

Return on Equity= (14,600,000)/ [(47,550,000+ 68,150,000)/2] =0.25

While ROE calculates the percentage return on invested equity, ROI calculates the percentage return on an investment. In other words, ROE measures an investment's "efficiency," whereas ROI measures its "profitability." A company is better at turning its equity financing into profits the higher the ROE.

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