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Equation of ROE

Hung-Hao Shen 3 years ago updated by Jeff Partlow 3 years ago 2

Hi, Jae


Could you add the equation of Return of Equity in the description?

Because I need to confirm the equation.


Thanks.


Hunghao

Can you go into the OSV analyzer and look up for formula directly from there?

Hunghao,


Jae is being curt in his replies.


Here is the written description in the OSV analyzer:

Return on Equity (ROE) measures the rate of return on the money invested by common stock owners and retained by the company thanks to previous profitable years.  It demonstrates a company’s ability to generate profits from shareholders’ equity (also known as net assets or assets minus liabilities).


So, ROE=Net Income/Shareholders' Equity which = Net Income/(Total Assets - Total Liabilities)

In the Financial Statements section of OSV, you can get:

Net Income for trailing twelve months (ttm) on the Income Statement.

Total Assets and Total Liabilities on the Balance Sheet [under most recent quarter (mrq)]


For example using Microsoft (MSFT):

ROE= $17.81B/($225.02B-$155.29B) = 25.54% which agrees with the 25.5% shown on the 'Summary' page; 'Key Stats' area of OSV for MSFT.


Hope this clears it up for you.  Please reply and let me know if you need any further clarification.


Jeff