What financial metric measures profit generated per dollar of common shareholder equity investment?
AReturn on Capital Employed (ROCE)
BReturn on Equity (ROE)
CReturn on Assets (ROA)
DEarnings Per Share (EPS)
Explanation
* Return on Equity (ROE) = (Net Income – Preferred Dividends) / Average Common Equity.
* It measures performance from the specific perspective of common equity investors.
* Higher ROE indicates effective profit generation from equity funds.
Exam Relevance
- Topic: Financial Analysis
- Subtopic: Profitability Ratios
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