stock

return on equity formula

return on equity formula

EFINITION of ‘Return On Equity – ROE’
The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.

return on equity formula

return on equity formula

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income/Shareholder’s Equity

Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder’s equity does not include preferred shares.
Also known as “return on net worth” (RONW).

ROE represents the price of capital (not the price of capital). It depends on the average interest rate, but it also depends on the price of capital and other two elements (technology, human). Large scale investment is indeed low ROE. But the supply of technology and human capital if the synchronization increases, it will increase the ROE.

 

Click to add a comment

You must be logged in to post a comment Login

Leave a Reply

stock

More in stock

Quis autem vel eum iure reprehenderit qui in ea voluptate velit esse quam nihil molestiae consequatur, vel illum qui dolorem?

Temporibus autem quibusdam et aut officiis debitis aut rerum necessitatibus saepe eveniet.

Copyright © 2014 Top News Theme. Theme by MVP Themes, powered by Wordpress.