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      Question

      Which ratio indicates how effectively management uses

      shareholders’ funds to generate profits?
      A Current ratio Correct Answer Incorrect Answer
      B Return on equity (ROE) Correct Answer Incorrect Answer
      C Quick ratio Correct Answer Incorrect Answer
      D Debt service coverage ratio Correct Answer Incorrect Answer
      E Inventory turnover ratio Correct Answer Incorrect Answer

      Solution

      ROE = Net income / Shareholders’ equity — measures return to owners.

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