Question: Return on equity can be computed by dividing net income by stockholders equity. It can also be computed by multiplying return on sales, asset turnover,

Return on equity can be computed by dividing net income by stockholders’ equity. It can also be computed by multiplying return on sales, asset turnover, and the assets-to-equity ratio. Using the definitions of the various ratios, show why both of these approaches yield the same answer.

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