Question

Puffy's Pastries generates five cents of net income for every $1 in equity. Thus, Puffy's has _______ of 5 percent.

Answer 1

Answer: return on equity

Explanation:

The return on equity is simply a measure of how profitable a business will be when it's being compared to its equity. Return on equity is the net income divided by the equity. It can also be gotten when liabilities is deducted from assets.

In the above analysis, return on equity equals 5% because 100 cents make 1 dollar. Therefore, 5/100 × 100 gives 5%.