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Sagot :
Return on Equity = Net Income/Shareholders Equity or
Return On Equity = Net Profit Margin × Total Asset Turnover × Equity Multiplier
Return on equity = 0.045 × 1.16 × 1.72 = 0.0898 or 8.98%
The ratio of a company's net income to the equity of its shareholders is known as return on equity (ROE). A company's profitability and the effectiveness of its revenue generation are measured by its return on equity (ROE). A corporation is better at turning its equity financing into profits the higher the ROE.
ROE is frequently used to evaluate a business against its rivals and the market as a whole. The method is particularly useful for evaluating businesses with a focus on tangible assets rather than intangible assets and for comparing businesses in the same industry since it frequently provides accurate indications of which businesses are operating more profitably.
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