Which of the following statements regarding the return on equity (ROE) measure is not true?
A. ROE is affected by a company's use of leverage.
B. ROE is used to measure the profitability of the firm in relation to the amount invested by stockholders.
C. ROE equals net income divided by average total stockholders' equity.
D. A company's ROE is lower than its return on investment because ROE does not consider that part of the business that is financed by debt.
Answer: D
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