How do I calculate return on equity?
Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. Because shareholders’ equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets.
How do you calculate ROA and ROE?
Return on Equity (ROE) is generally net income divided by equity, while Return on Assets (ROA) is net income divided by average assets. There you have it. The calculations are pretty easy.
What is a good return on equity?
ROE is especially used for comparing the performance of companies in the same industry. As with return on capital, a ROE is a measure of management’s ability to generate income from the equity available to it. ROEs of 15-20% are generally considered good.
How do you analyze return on equity?
Return on Equity (ROE) and Income Statement Analysis
- ROE Formula. Return on Equity = Net Income ÷ Average Common Stockholder Equity for the Period.
- ROE Example. Return on Equity = Net Income ÷ Average Common Stockholder Equity for the Period. ROE = $21,906,000 ÷ $209,154,000.
- DuPont Model ROE Formula. Return on Equity = Net Profit Margin x Asset Turnover x Equity Multiplier.