Question: a. Equity turnover is sales divided by average shareholders equity. What does equity turnover measure? How is it related to return on common equity? (Hint:

a. Equity turnover is sales divided by average shareholders’ equity. What does equity turnover measure?

How is it related to return on common equity? (Hint: Look at the components of ROCE.)

b. “Growth in earnings per share from an increase in equity turnover is unlikely to continue indefinitely.”

Do you agree or disagree with this assertion? Explain your answer and discuss the components of equity turnover for their impact on earnings.

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