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The return on equity (ROE) is a measure of the profitability of a business in relation to its equity; [1] where: . ROE = Net Income / Average Shareholders' Equity [1] Thus, ROE is equal to a fiscal year's net income (after preferred stock dividends, before common stock dividends), divided by total equity (excluding preferred shares), expressed as a percentage.
Return on equity (ROE) and return on assets (ROA) determine how efficient a company can be at generating profits. Both formulas that can help investors determine how good a company is at turning a ...
Return on capital employed is an accounting ratio used in finance, valuation, and accounting. It is a useful measure for comparing the relative profitability of companies after taking into account the amount of capital used.
Return on investment (ROI) or return on costs (ROC) is the ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably to its cost.
The company's operating income margin or return on sales (ROS) is (EBIT ÷ Revenue). This is the operating income per dollar of sales. [EBIT/Revenue] The company's asset turnover (ATO) is (Revenue ÷ Average Total Assets). The company's equity multiplier is (Average Total Assets ÷ Average Total Equity). This is a measure of financial leverage.
Return on capital (ROC), or return on invested capital (ROIC), is a ratio used in finance, valuation and accounting, as a measure of the profitability and value-creating potential of companies relative to the amount of capital invested by shareholders and other debtholders. [1] It indicates how effective a company is at turning capital into ...
From January 2008 to December 2012, if you bought shares in companies when Gary D. Cohn joined the board, and sold them when he left, you would have a -40.6 percent return on your investment, compared to a -2.8 percent return from the S&P 500.
High cash reserves can also indicate that the company is not effective at deploying its CCE resources, whereas for big companies it might be a sign of preparation for substantial purchases. The opportunity cost of saving up CCE is the return on equity that company could earn by investing in a new product or service or expansion of business. [4]