At Sips and Chips, a local cybercafé, management is measuring the profit earned on each dollar invested by the shareholders. What are the managers measuring?
A) the firm's return on assets
B) the firm's degree of financial leverage
C) the firm's earnings per share
D) the firm's return on equity

Question

Quizplus · Accepted Answer

The managers at Sips and Chips are measuring the profit earned on each dollar invested by the shareholders, which is a measure of the firm's return on equity (ROE). ROE is calculated by dividing net income by shareholder equity, which shows how much profit the company generates for each dollar invested by shareholders.

At Sips and Chips, a Local Cybercafé, Management Is Measuring