Return on Equity: Return on Equity is performance measure used to compare earnings (Net Income) to the firm’s total Equity (Shareholder equity + retained earnings). ROE gives owners a metric, expressed as a percentage or ratio, that provides perspective on the return they are receiving from the dollars they have invested into the firm.
The return on investment formula: Net Profit Annualized before tax /Total Equity (Shareholder equity + retained earnings). In FinancialSoft Financial tools the annualized Net Profit is the last 3 month sales multiplied by 4.
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