How to Calculate Return on Equity and Return on Assets


show more Calculating return on equity and return on assets provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2007: Financial Analysis show less
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Calculating return on equity and return on assets

In this lesson, I'll discuss how to calculate return on equity and return on assets, two important ratios when you're considering the financial health of a company. A publicly traded company has one goal: to maximize a shareholder value. The bottom line measure of a firm shareholder value is its equity, which is Total Assets minus Total Liabilities. Comparing the relationship between a company's earnings to its equity provides a clear picture of the company's ability to generate returns for its stockholders. You divide the company's net income, which is its income after taxes by its shareholder's equity.

So here in the worksheet, I have two entries, one is the Net Income After Taxes and the other is the Shareholder's Equity. So to divide the two, type equal to start the formula and we have Net Income After Taxes in cell B5, divide that by Shareholder's Equity in B6 and press Enter and there you have your ratio of 0.11 for the return on equity. You can compa...

Calculating return on equity and return on assets
Video duration: 2m 51s 2h 18m Intermediate

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Calculating return on equity and return on assets provides you with in-depth training on Business. Taught by Curt Frye as part of the Excel 2007: Financial Analysis

Subject:
Business
Software:
Excel
Author:
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