Return on stockholders' equity is equal to times times .
A)net profit margin;fixed asset turnover;equity multiplier ratio
B)gross profit margin;total asset turnover;equity multiplier ratio
C)net profit margin;total asset turnover;equity multiplier ratio
D)net profit margin;total asset turnover;debt-to-equity ratio

Question

Quizplus · Accepted Answer

Return on stockholders' equity (ROE) is calculated by dividing net income by average equity. Net profit margin is the ratio of net income to total revenue, which is a component of ROE. Total asset turnover is the ratio of total revenue to average total assets, which measures how efficiently a company utilizes its assets to generate revenue. The equity multiplier ratio is the ratio of total assets to equity, which measures how much debt a company uses to finance its assets. Therefore, net profit margin, total asset turnover, and equity multiplier ratio are the three components of ROE. Gross profit margin is not included in ROE calculation, and debt-to-equity ratio measures a company's capital structure, which is not a component of ROE.

Return on Stockholders' Equity Is Equal to Times Times