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In other words the return on equity ratio shows how much profit each dollar of common stockholders equity generates.
Return on equity ratio analysis interpretation. The measure is used by investors to determine the return that an organization is generating in relation to their investment in it usually in relation to the return generated by other companies in the same industry. Return on equity ROE measures the income generated by entity against each dollar of stakeholders invested in entitys residual interest or equity. Return on Equity ROE is one of the Financial Ratios use to measure and assess the entitys profitability based on the relationship between net profits over its averaged equity.
It is also known as Return on Net Worth. Return on assets ROA is a profitability ratio that measures the rate of return on resources owned by a business. What is Return on Equity Analysis.
PBIT c Return On Capital Employed ROCE 100 X Capital Employed This ratio indicates how efficiently a business is using the funds available equity and long-term debt. Defined also as return on net worth RONW return on equity reveals how much profit a company earned in comparison to the money a shareholder has invested. Return on Equity Analysis.
Return on Equity interpretation Return on Equity ROE is an indicator of companys profitability by measuring how much profit the company generates with the money invested by common stock owners. Return on equity ROE is a measure of financial performance calculated by dividing net income by shareholders equity. Therefore the return on equity ratio for company A 200000015000000 is 13 while the ROE for Company B is 10 500000050000000.
It is one of the different variations of return on investment ROI. To interpret the numbers in these three reports it is essential for the reader to use financial ratios. Hence it is also known as return on stockholders equity or ROSHE.
Two main important elements of this ratio are Net Profits and Shareholders Equity. The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company. It measures the level of net income generated by a companys assets.
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