eturn on equity is net income minus taxes divided by ______.Multiple choice question.common stock outstandingcurrent liabilitiesnet salestotal owners' equity

Break Down the Problem

1. We need to identify the correct denominator for the return on equity (ROE) formula.
2. Recall the formula for Return on Equity.

Relevant Concepts

1. The standard formula for Return on Equity is: $\text{ROE} = \frac{\text{Net Income}}{\text{Total Owners' Equity}}$
2. This formula indicates that ROE measures the profitability of a company in relation to shareholders' equity.

Analysis and Detail

1. In the context of ROE, "net income" represents the profit after all expenses, including taxes.
2. "Total owners' equity" refers to the net assets available to shareholders, which is calculated as total assets minus total liabilities.

Verify and Summarize

1. The other options (common stock outstanding, current liabilities, net sales) do not accurately represent the denominator needed for calculating ROE.
2. Therefore, the correct option from the multiple-choice options is "total owners' equity."

Final Answer

Return on equity is net income minus taxes divided by total owners' equity.