The formula to calculate the Return on Equity (ROE) is:
ROE=(Net ProfitEquity)×100
Where:
Return on Equity (ROE) is the ratio of net profit to total equity spent on a project. It is a measure of the profitability of a business in relation to the equity.
Let's assume the following values:
Using the formula:
ROE=(50,000200,000)×100=25%
The Return on Equity is 25%.
Let's assume the following values:
Using the formula:
ROE=(75,000300,000)×100=25%
The Return on Equity is 25%.