[Anonymous]

One of the questions on the Wiley test bank asked, “An investor has been given several financial ratios for a company but none of the financial reports. Which combination of ratios can be used to derive return on equity?” The answer is “Return on sales and asset turnover” – I thought this is the formula for ROI? Any comments? Is this wrong or am I missing something? Help would be greatly appreciated. Thanks in advance.

[misanthrope87]

It's the same thing..because total assets = total equity(which includes the liabilities). A= L+OE At least that's what I figured. I'm sure someone else has a better explanation.

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[J.P.]

Look into the DuPont method.

BEC - 11/25/08-61, 8/31/09-76*, 2/24/12-76
AUD - 2/21/09-53, 8/31/10-60, 11/30/11-83
REG - 11/30/09-68, 5/31/12-79
FAR - 8/29/11-81

IL Ethics - 93

*Lost to 18-month Rule

[GVirgiL]

Return on investment is the ratio of a measure of “return” divided by a measure of “investment.” There are various ways to measure ROI including: return on assets (ROA), return on net assets (RONA) and return on equity (ROE). ROI is most often computed using net income (income after interest and taxes) but it also may be computed using operating income or operating income after taxes.

[GVirgiL]

i got that off the Wiley text /cpa online test bank 2012

[Author]

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