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Rzqust [24]
3 years ago
12

Which financial leverage ratio is used with two other ratios to mathematically produce the return on equity ratio?

Business
1 answer:
ipn [44]3 years ago
5 0

Answer: c. Total Assets/ Equity

Explanation:

To measure the Return on Equity with 3 ratios, the <em>DuPont Analysis</em> can be used. This is a technique of deconstructing the Return on Equity ratio into various constituent ratios so that their effect on Return on Equity is better know.

The basic DuPont Analysis is;

Return on Equity = \frac{Net Income}{Revenue} * \frac{Sales}{Total Assets}  * \frac{Total Assets}{Equity}

Total Assets/ Equity or the Assets to Shareholder Equity ratio is the answer.

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