Return on Equity Explained | ROE | FIN-ED

#fin-ed
Return on Equity Explained | ROE | FIN-ED
Hi, in this video, I am going to explain what Return on Common Equity (ROE) is and how to calculate this ratio with a simple numeric example.
Return on common equity is an important account ratio, which is calculated as net income over common equity.

Stockholders expect to earn a return on their money, and this ratio tells how well they are doing in an accounting sense. In general, the higher the ROE, the better. However, to get a better picture of the firm, the ROE ratio of a company should be compared to its past ROE ratios or industry average ROE.

A firm has a profit margin of 3% and equity multiplier of 1.9. Its sales are $150 million, and it has total assets of $60 million. What is its ROE?

Source: Fundamentals of Financial Management (Concise Edition)
Brigham and Houston
Chapter 4: Problem 4-6

Thanks for watching...!!!