Question: What is the formula for calculating the return on equity (ROE)?

Options:

1. Net Income / Total Assets
2. Net Income / Shareholder\'s Equity
3. Total Revenue / Total Assets
4. Net Income / Total Liabilities

Correct Answer: Net Income / Shareholder\'s Equity

Solution:

Return on Equity (ROE) is calculated by dividing net income by shareholder\'s equity, indicating how effectively management is using a company’s assets to create profits.