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

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Which formula determines the Return on Equity (ROE)?

A. Net Profit / Total Assets

B. Operating Profit / Capital Employed

C. Gross Profit / Sales

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

Answer: Option D

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

Heavy advertisement expenditure to launch a new product, whose benefit will last for 3-5 years, is an example of:

A. Deferred Revenue Expenditure

B. Revenue Expenditure

C. Capital Expenditure

D. Fictitious Expenditure

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Correct Answer: Option A

Explanation:
It is revenue in nature but deferred because the benefit spans multiple years, written off partially each year.

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Question #2

Which of the following is a feature of 'Process Costing'?

A. Each job is separate

B. Used for unique products

C. Costs are accumulated by processes

D. Used for construction contracts

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Correct Answer: Option C

Explanation:
Process costing applies to continuous production where output is homogeneous, costs tracked by process.

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Question #3

The financial statement that shows profitability for a period is:

A. Funds Flow Statement

B. Balance Sheet

C. Profit and Loss Account

D. Cash 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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