Question

an investment property generates a cash flow of $40,000. the owner has $360,000 equity in the property. what is the owner’s return on equity?

Answer 1

The owner’s return on equity is 0.111

$40,000 ÷ $360,000 = 0.111 = 11%

In finance, equity is the possession of property that could have money owed or other liabilities attached to them. equity is measured for accounting functions by using subtracting liabilities from the fee of the property.

Equity is described as ​“the state, first-rate or ideal of being simple, impartial and truthful.” The idea of fairness is synonymous with fairness and justice. it's far helpful to consider fairness as now not genuinely a preferred situation or a lofty value.

Equity may be calculated through subtracting liabilities from property and may be carried out to an unmarried asset, along with actual property, or to a business. as an instance, if someone owns a house worth $400,000 and owes $three hundred,000 on the loan, the difference of $a hundred,000 is fairness.

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