Which of the following is a good measure of return on owners' equity? (A) Gearing (B) Liquidity (C) Profitability (D) Solvency - HSC - SSCE Business Studies - Question 15 - 2001 - Paper 1

To determine which option is a good measure of return on owners' equity, we need to understand the implications of each choice:

1. Gearing refers to the ratio of a company’s debt to its equity. It does not directly measure return on equity but rather the financial risk associated with high levels of debt.

2. Liquidity indicates a company’s ability to meet short-term obligations. While important, it does not reflect the profitability or return on equity directly.

3. Profitability measures the ability of a company to generate income relative to its revenue, operating costs, and equity. As this directly relates to the earnings it generates on the owner's equity, it is the best measure of return on owners' equity.

4. Solvency assesses whether a company can meet its long-term debts. Like liquidity, it does not measure return on equity.

Based on this analysis, the correct answer is (C) Profitability, as it specifically measures the returns generated on the owners' equity.