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Profitability : Business Finance MCQ Practice Questions & Answers (English) - ObjectiveMcq

Business Finance Practice

Topics

Capital Budgeting Decisions
- NPV
- Payback Period
Capital Structure
Dividend Decision
- Financial Management
Financial Management
Financial Ratios
- Profitability
Sources Of Finance
Working Capital Management

PracticeBusiness FinanceFinancial RatiosProfitability

Profitability in Business Finance : Practice MCQ Questions & Answers with Explanations

1 practice sets · Page 1 of 1

Business FinanceEasyFinancial RatiosProfitability

1.

Return on Equity (ROE) is calculated as:

A

Net Profit / Total Assets

B

Net Profit / Shareholders' Equity

C

Gross Profit / Revenue

D

EBIT / Total Capital Employed

Correct Answer:

(B) Net Profit / Shareholders' Equity

Explanation:

The correct answer is B: Net Profit / Shareholders' Equity.

ROE measures how effectively management is using shareholders' equity to generate profit. A higher ROE indicates more efficient use of equity capital. It is one of the most important profitability ratios used by investors to assess a company's financial performance.