Return On Equity explained

What is Return On Equity? Return On Equity or ROE is a financial ratio that can help you analyze the performance of a company or business unit from the perspective of the shareholder, and compare the financial performance to others. This video takes you through the Return On Equity formula, shows you how to calculate ROE, how to interpret ROE, and gives suggestions on how to improve Return On Equity.

Return On Equity links together information from two of the three main financial statements, by taking the bottom line of net profit from the income statement and the equity or shareholder capital amount out of the right hand side of the balance sheet. ROE is an important element of #ratioanalysis

ROE or Return On Equity is defined as Net Income divided by Equity. In other words, the net profit that a company has generated during a year, divided by the book value of the shareholder capital that a company owes on the balance sheet date. ROE is an important indicator of attractiveness of a business to shareholders. Can the company generate a good return on the equity that investors have invested in it?

Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and accounting enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[Aczxser]

You do an EXCELLENT job, thank you. I'm currently taking a Corporate Finance course in school so this is helping to do an analysis of Corning Inc.

[Fjhaha]

Great made video, super clear & simplified explanation . Good job sir!

[adlinshazwani]

thank you so so much for the simple and easy-to-understand explanation, it really helps a lot! :D

[Krantiveer]

once my friend ask about efficiency and effectiveness, and i show him your videos..

[bbbulan_]

thank u so much! so helpful and easy to comprehend 😊

[yosmuc]

Thank you so much for this video. There is something small which is unclear to me at 1:30 ''do you pay a large div to shareholders, to reduce the amount of earnings that are part of the equity on the balance sheet?'' Div reduce the retained earnings but how come they are part of the equity? In other words, how come more dividends affect the equity number. Thank you again for the great video and time :)

[KW-qntg]

Your videos are soooo helpful !! amazing

[chester]

In case anyone's lecture notes is slightly different, ROE can also be viewed as ROA multiply Equity multiplier

[nayana]

can i ask profit after tax and profit of the year is it the same?

[Johnny.bar]

hey man, great videos, BUT GET A NEW MIC