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Basic Question 1 of 6

Which of the following formulas is the formula for computing return on equity (ROE)?

A. Net income divided by assets
B. Net income divided by equity
C. Sales divided by assets
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User Contributed Comments 7

User Comment
Gina NI/A=ROI
NI/E=ROE
A/E=Fin.Leverage
S/A=A Turnover
julescruis thanks gina
godz if you got this wrong dont show up at the exam center
Drzewes GIna:

NI/A is ROA

ROI = NI/ Equity + total debt

I am almost :) sure.
endlessfin1te isn't Asset = Equity + Debt anyway?
johntan1979 Look at the explanation given in the answer... the only way ROE > ROI is when the equity multiplier or leverage is > 1.

In other words, ROI = NI/A = ROA
ldfrench @godz, el oh el plz don't be mean (i mean it plz)
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes

Barnes

Learning Outcome Statements

demonstrate the application of DuPont analysis of return on equity and calculate and interpret effects of changes in its components

CFA® 2025 Level I Curriculum, Volume 3, Module 11.