Calculate return on equity from the following information: Sales = $400,000
Expenses = $100,000
Debts incurred = $120,000
Owner's equity = $180,000.

A) 2:3
B) 3:2
C) 5:3
D) 4:5
E) 5:1

Return on Equity

A financial ratio that measures the profitability of a corporation in relation to stockholders’ equity, indicating how well a company uses investment funds to generate earnings growth.

Sales

The activity or business of selling products or services.

Expenses

Outflows of money or other valuable assets, incurred as a result of operating activities or in the pursuit of generating revenues.