Which formula determines the Return on Equity (ROE)? MCQ with Answer and Explanation

Question

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Which formula determines the Return on Equity (ROE)?

A. Net Profit available to Equity Shareholders / Equity Shareholder's Funds

B. Net Profit / Total Assets

C. Gross Profit / Sales

D. Operating Profit / Capital Employed

Answer: Option A

Solution (By JKSSB Mock Tests)

ROE measures the profitability of equity funds, showing how much profit a company generates with the money shareholders have invested.

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Question #1

IFRS stands for:

A. International Financial Reporting Standards

B. Indian Financial Reporting Standards

C. Integrated Financial Record System

D. Internal Fraud Recording System

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Correct Answer: Option A

Explanation:
IFRS are globally recognized accounting standards issued by the IASB to bring consistency and comparability to financial statements worldwide.

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Question #2

An auditor is considered a 'watchdog and not a bloodhound'. This implies:

A. The auditor must approach the work with reasonable care and skepticism, but not assuming everyone is dishonest

B. The auditor investigates only cash transactions

C. The auditor must be aggressive in finding fraud

D. The auditor works only at night

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Correct Answer: Option A

Explanation:
Coined in the Kingston Cotton Mill case, it means an auditor must exercise reasonable skill and care but isn't required to approach the audit with suspicion of fraud.

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Question #3

The financial statement that shows profitability for a period is:

A. Balance Sheet

B. Cash Flow Statement

C. Profit and Loss Account

D. Funds Flow Statement

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Correct Answer: Option C

Explanation:
Profit and Loss Account shows the net profit or loss over a period.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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