Return on Equity

The Return on Equity (ROE) = Net Profits after Tax/Shareholder Equity.

The return on equity is the product of the three DuPont ratios (core ratios).

Return on equity = Sales/Total Assets*Total Assets/Equity*NPAT/Sales.

Return on equity is sometimes considered to be the most important return measure.

However because income is subject to any number of internal accounting adjustments and because the ratio does not incorporate an assessment of risk, it cannot be regarded as great value when comparing ratios across different companies.

Reference Pages

Return on Invested Capital