Question

multiple choice question

which of the following reports net income relative to average common stockholders equity?

roa
debt/equity ratio
p/e ratio
roe
eps

Explanation:

Define the target financial ratio

The question asks for the financial ratio that measures net income relative to average common stockholders' equity.

Analyze the given options

• ROA (Return on Assets): Measures net income relative to average total assets.
• Debt/equity ratio: Measures total liabilities relative to total stockholders' equity.
• P/E ratio (Price/Earnings ratio): Measures market price per share relative to earnings per share.
• ROE (Return on Equity): Measures net income relative to average common stockholders' equity.
• EPS (Earnings Per Share): Measures net income allocated to each outstanding share of common stock.

Identify the correct match

The ratio that reports net income relative to average common stockholders' equity is Return on Equity (ROE).

Answer:

• ROA
• Debt/equity ratio
• P/E ratio
• ROE (Correct answer)
• EPS