Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
The ratio that tells you how much income is used up by expenses is the
True or False?
A financial ratio called return on assets (ROA) describes how lucrative a business is in comparison to its total assets. An organization's management, analysts, and investors can use ROA to assess how effectively a business uses its resources to make a profit.
A company's net income and average assets are used to calculate the metric, which is frequently reported as a percentage. While a lower ROA suggests there is space for improvement, a greater ROA implies a corporation is more effective and efficient at managing its balance sheet to generate profits.
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