The Return on Equity Ratio: Formula, Calculation & Analysis


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question 1 of 3

Given the following snippets from the income statement and balance sheet, what is the return on equity ratio for Company Q?

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1. When analyzing the return on equity ratio, which of the following is a good practice?

2. The return on equity ratio for a given stock is .25. Which of the following BEST describes this value?

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About This Quiz & Worksheet

We've made it easy to check your comprehension of the formula and analysis of the return on equity ratio with our quiz and worksheet. You'll be asked about some of the best practices for analyzing a return on equity (ROE), what ROE measures and how to calculate it using example data.

Quiz & Worksheet Goals

Take this quiz to assess your understanding of how to:

  • Calculate the return on equity given example data
  • Detail best practices for analyzing ROE
  • Explain what ROE means in literal terms
  • Discuss what return on equity measures
  • Describe what it means if the ROE of a stock is greater than 1

Skills Practiced

  • Information recall - access the knowledge you've gained regarding what ROE of greater than 1 means
  • Reading comprehension - ensure that you draw the most important information from the related return on equity ratio lesson, like the best way to analyze ROE
  • Interpreting information - verify that you can read information regarding what ROE measures and interpret it correctly

Additional Learning

We've created a lesson called The Return on Equity Ratio: Formula, Calculation & Analysis to assist you if you'd like to learn more about this subject. In addition to covering the questions on this quiz, this lesson is also designed to help you:

  • Identify what kind of ratio ROE is classified as
  • Define equity and why it's important for an investor to understand
  • Describe the equation used to calculate return on equity