What does "return on equity" (ROE) measure?

Return on equity (ROE) measures a corporation's profitability in relation to shareholders' equity. It is a crucial financial metric that indicates how effectively a company is using the equity from its shareholders to generate profit. The formula for ROE is net income divided by shareholders' equity, and a higher ROE signifies more efficient use of equity, reflecting a strong performance in generating returns for shareholders.

Understanding ROE is vital for investors, as it provides insight into a company’s financial health and operational efficiency. A company with a consistently high ROE is often viewed favorably by investors because it suggests that the management is able to turn capital into profits effectively.

Other options relate to different financial concepts; for example, the total value of a company's assets doesn't connect directly to the profitability aspect of shareholder equity. Similarly, the growth rate of a company's sales pertains to revenue generation rather than how well profits are generated concerning equity, and the proportion of debt to total assets deals with capital structure rather than profitability measurements. Thus, option A stands out as the correct choice because it directly addresses the relationship between profits and shareholder equity.