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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.
ROCE is used to prove the value the business gains from its assets and liabilities. Companies create value whenever they are able to generate returns on capital above the weighted average cost of capital (WACC). [3]
The return on equity (ROE) ratio is a measure of the rate of return to stockholders. [4] Decomposing the ROE into various factors influencing company performance is often called the DuPont system . [ 5 ]
Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is...
While some investors are already well versed in financial metrics (hat tip), this article is for those who would like...
While some investors are already well versed in financial metrics (hat tip), this article is for those who would like...
Return on equity (ROE) Return on invested capital (RoIC) Return on Investment + cost of Living(ROIL) (Frequently used for small businesses.) Return on marketing investment (ROMI) is "the contribution attributable to marketing (net of marketing spending), divided by the marketing 'invested' or risked; Return on modeling effort (ROME)
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