1. What is Return On Common Stockholder Equity?

Return On Common Stockholder 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 investors assessing a company's financial performance.

2. How Does the Calculator Work?

The calculator uses the ROE formula:

Where:

• \( \text{Audited Income} \) — Net income after taxes and preferred stock dividends (currency)
• \( \text{Verified Equity} \) — Total common stockholders' equity (currency)

Explanation: The equation shows what percentage return the company generates on the equity invested by shareholders.

3. Importance of ROE Calculation

Details: ROE is crucial for investors to evaluate investment returns, compare company performance within an industry, and assess management's efficiency in generating profits from equity financing.

4. Using the Calculator

Tips: Enter audited income and verified 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 between 15-20% is considered good, but this varies by industry. Compare with industry averages.

Q2: Can ROE be too high?
A: Exceptionally high ROE may indicate excessive debt or inconsistent profits. Investigate the reasons behind high values.

Q3: How often should ROE be calculated?
A: Typically calculated quarterly with financial statements and annually for comprehensive analysis.

Q4: What's the difference between ROE and ROI?
A: ROE focuses specifically on returns to common shareholders, while ROI measures return on all invested capital.

Q5: Does ROE work for all companies?
A: Most useful for comparing companies in the same industry. Less meaningful for financial institutions or companies with negative equity.