In this accounting video, we cover Return on Equity (ROE) and its significance in financial analysis.
ROE is a key metric used to assess how efficiently a company generates net income for its equity shareholders. To compute ROE, you divide Net Income by Average Total Equity.
Understanding this ratio helps investors gauge how effectively a company utilizes equity to generate profits. Comparing ROE across companies provides insights into which is performing better. ROE serves as a critical indicator for both current and potential investors, offering valuable insights into the profitability and efficiency of equity investments.
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Jonathan M. Wild
www.wildaccounting.com
#accounting #accountingstudent #accountingbasics #returnonequity #financialaccounting
Understanding Return on Equity (ROE) | Financial Accounting
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