Question

Return on common stockholders' equity is most closely related to
a. gross profit rate and operating expenses to sales ratio.
b. profit margin and free cash flow.
c. times interest earned and debt to stockholders' equity ratio.
d. return on asset and leverage (debt to assets ratio).

Answer 1

Answer:

The correct option is D

Explanation:

Return on common stockholders' equity also known as ROE which stands for Return on equity ratio, that measures the ability of the firm or company to generate the profits from the investment of shareholders in the company.

Where as Debt to assets ratio, is the one which measures the percentage of aggregate assets of the firm or company which were financed by the creditors.

Therefore, the return on common stockholders' equity is related to the debt to asset ratio.