What is ROE?? ROA?? ROR ??
Return On Equity (ROE)
Return On Equity (ROE)
Identifies The Value Relative To The Invested Capital Represented By A Company’s Profits – Its Profitability
A business that has a high return on equity is more likely to be one that is capable of generating cash internally. For the most part, the higher a company's return on equity compared to its industry, the better.
Formula for Return on Equity
The formula for Return on Equity is:
Net Profit ÷ Average Shareholder Equity for Period = Return on Equity
Return On Assets (ROA)
A business that has a high return on equity is more likely to be one that is capable of generating cash internally. For the most part, the higher a company's return on equity compared to its industry, the better.
Formula for Return on Equity
The formula for Return on Equity is:
Net Profit ÷ Average Shareholder Equity for Period = Return on Equity
Return On Assets (ROA)
Identifies The Degree To Which The Company Is Able To Earn A Spread On Asset Accumulation Business
If a company has a ROA of 20%, it means that the company earned $0.20 for each $1 in assets. As a general rule, anything below 5% is very asset-heavy (manufacturing, railroads), anything above 20% is asset-light (advertising firms, software companies).
Return On Revenue (ROR)
Identifies The Degree To Which The Company Is Able To Convert The Business (Revenues) Into Profits
Investopedia explains Return On Revenue - ROR
The ROR is useful in comparing the profitability of a company from year to year. Intrinsically, the difference between net income and revenue is expenses, such that an increasing ROR implies less expense for higher net income.
The ROR is useful in comparing the profitability of a company from year to year. Intrinsically, the difference between net income and revenue is expenses, such that an increasing ROR implies less expense for higher net income.
