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Sunday, July 3, 2011

Return on Equity (ROE) Ratio Analysis

Definition: Return on Equity (ROE) ratio (also refereed to as return on net worth) measures the amount of profit that a company generates through the use of shareholders' equity (also known as net assets or assets minus liabilities).

Formula:

Return on Equity Ratio = Net income after tax / Average shareholders equity
Or,
Return on Equity has three ratio components:
ROE = Profit Margin * Asset

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