1. What is Return On Common Stock Equity?

Return on common stock equity (ROE) measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. It's a key metric for assessing financial performance.

2. How Does the Calculator Work?

The calculator uses the ROE formula:

Where:

• Net Income — Company's total earnings or profit
• Shareholders Equity — Total assets minus total liabilities

Explanation: The formula shows what percentage return the company generated on shareholders' investments.

3. Importance of ROE Calculation

Details: ROE helps investors compare the profitability of companies in the same industry. A higher ROE indicates more efficient use of equity capital.

4. Using the Calculator

Tips: Enter net income and shareholders equity in the same currency units. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROE value?
A: Generally, ROE above 15% is considered good, but this varies by industry. Compare with industry averages for meaningful analysis.

Q2: Can ROE be too high?
A: Yes, extremely high ROE may indicate excessive leverage (debt) rather than true operational efficiency.

Q3: How does ROE differ from ROI?
A: ROE measures return specifically on shareholders' equity, while ROI measures return on any type of investment.

Q4: Should ROE be analyzed alone?
A: No, it should be considered alongside other metrics like debt-to-equity ratio for complete financial analysis.

Q5: How often should ROE be calculated?
A: Typically calculated quarterly with financial statements, but annual ROE is most meaningful for long-term analysis.