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Return on Equity
The return on equity ratio measures how efficient the company is at generating profit (net income) using its equity.
Interpreting the Ratio
- Measures how many dollars of net income are generated for every $1 of shareholders' equity.
- A high ratio indicates that the company is generating larger profits for its shareholders.
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Example: Return on Equity
Nike, Inc. reported the following results for the years ended May 31st, 2019 and 2020. What is the return on equity in 2020?
Practice: Return on Equity
Compute the return on equity ratio for the year 2020. Do not round your work, round your final answer to 4 decimal places and enter you answer in decimal form.
