Return on equity can increase as a result of an increase in which of the following ratios?
A)Net income/ sales
B)Sales/ total assets
C)Total assets/ equity
D)All of the above will have a positive influence on the ROE.

Question

Quizplus · Accepted Answer

Return on Equity (ROE) is influenced by three main components: net profit margin (Net income/Sales), asset turnover (Sales/Total Assets), and financial leverage (Total Assets/Equity). An increase in any of these ratios indicates a more efficient use of equity, thereby increasing the ROE.

Return on Equity Can Increase as a Result of an Increase