Return on Equity (ROE) Flashcards
1
Q
Return on equity calculation?
A
(Firm’s net earnings - preferred dividends) / common equity dollars in the company
2
Q
(Firm’s net earnings - preferred dividends) / common equity dollars in the company
A
Return on equity calculation?
3
Q
Why is ROE useful?
A
For shareholders who want to know how profitable their capital is in the business they invest in
4
Q
For shareholders who want to know how profitable their capital is in the business they invest in
A
Why is ROE useful?
5
Q
Why is a higher ROE useful?
A
The better the company is at generating profits
6
Q
The better the company is at generating profits
A
Why is a higher ROE useful?
