Asked by Meliza Acosta on May 11, 2024
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The formula for the return on equity is: Return on equity = Net income ÷ Average total stockholders' equity.
Return On Equity
A measure of financial performance calculated by dividing net income by shareholder equity, indicating how effectively a company uses investments to generate earnings.
Average Total Stockholders' Equity
Average total stockholders' equity calculates the mean equity held by shareholders over a given period, indicating the ownership value in a company.
Net Income
Net Income is the total earnings computed as revenues minus expenses, taxes, and the cost of goods sold, indicating a company's profitability over a specified period.
- Comprehend the methodology for computing returns, particularly focusing on return on total assets and return on equity, and their significance in evaluating the overall financial success.
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Learning Objectives
- Comprehend the methodology for computing returns, particularly focusing on return on total assets and return on equity, and their significance in evaluating the overall financial success.
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