Series 79 practice questionhardReturn on Equity Calculation
A company has net income of $80 million and average shareholders’ equity of $400 million. What is its return on equity (ROE)?
- A15%
- B20%✓ Correct answer
- C10%
- D5%
Explanation
Why B — 20%
ROE equals net income divided by average shareholders' equity: $80 million ÷ $400 million = 20%. Therefore, B is correct.
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