What does the ratio measure

Question

Profitability ratio

Response to the following problem:

Comparative balance sheets for Softech Canvas Goods for 2016 and 2015 are shown below. Softech pays no dividends, and instead reinvests all earnings for future growth.

                                                      Comparative Balance Sheets
                                                                    ($ in 000s)

                                                                    December 31
                                                                 2016              2015
Assets:

Cash                                                           $ 50              $ 40
Accounts receivable                                        100              120
Short-term investments                                  50               40
Inventory                                                      200             140
Property, plant, and equipment (net)                600             550
                                                                  $1,000         $890

Liabilities and Shareholders' Equity:

Current liabilities                                             $ 240           $210
Bonds payable                                                  160             160
Paid-in capital                                                    400             400
Retained earnings                                             200             120
                                                                   $1,000           $890

Required:

1. Determine the return on shareholders' equity for 2016.

2. What does the ratio measure?