In two successive years, it is possible for a firm to have identical profit and maintain identical levels of assets, but have different return on equity.

Question

Quizplus · Accepted Answer

Return on equity is calculated as net income divided by equity. Net income can remain the same while different factors, such as changes in debt levels or stockholder equity, can lead to different levels of equity and thus different return on equity.

In Two Successive Years, It Is Possible for a Firm