Which of the following is the correct formula to calculate ROE?
A) ROE = EBT $\div$ Equity
B) ROE = EBIT $\div$ Equity
C) ROE = Net income $\div$ Equity
D) ROE = Gross profit $\div$ Equity

Question

Which of the following is the correct formula to calculate ROE?
A) ROE = EBT $\div$  Equity
B) ROE = EBIT $\div$  Equity
C) ROE = Net income $\div$  Equity
D) ROE = Gross profit $\div$  Equity

Quizplus · Accepted Answer

The correct formula to calculate return on equity (ROE) is: Net income ÷ Equity. Option C is the only one that includes net income and equity in the formula. Earnings before taxes (EBT), earnings before interest and taxes (EBIT), and gross profit are not directly related to equity, and the given formulas are incorrect.

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