Investors are not the only ones interested in this key figure. Also Banks <\/strong>and Business owner <\/strong>and all forms of Investors <\/strong>inform about the return on equity of a group.<\/p>\n\n\n\n You can easily carry out the calculation yourself. For this you need the Profit <\/strong>and the Equity capital employed<\/strong> of the respective company. This results in the following formula:<\/p>\n\n\n\n This calculation gives you a percentage value. You will find the amount of equity in the company balance sheet. The profit, on the other hand, can be found in the profit and loss account. This is the Net income for the year<\/strong>after taxes have been deducted. <\/p>\n\n\n\n The return on equity should as high as possible <\/strong>be. As a minimum, the ratio should be higher than the profitability on the long-term capital market. It should be borne in mind that the equity capital employed must greatest risk <\/strong>is associated with this. The risk should therefore pay off in the form of high returns.<\/p>\n\n\n\n This key figure is used by investors to assess a company. They want to know how high the interest rate <\/strong>is when they invest capital themselves. However, companies are also interested in increasing their return on equity. This includes, for example, knowing how high the Liquidity <\/strong>and the Cash flow<\/a> <\/strong>are. <\/p>\n\n\n\n The decision as to whether or not to invest in a company should never be based solely on return on equity. Other key figures should also be taken into account, such as the Return on assets<\/strong>which includes debt and equity. <\/p>\n\n\n\n In principle, the return on equity should at several points in time over a longer period of time<\/strong> must be checked in order to obtain a meaningful result. <\/p>\n\n\n\n Less meaningful<\/strong> the return on equity is often Start-ups<\/strong>some of which are not yet able to generate profits. In such cases, you should use other key figures as a guide.<\/p>\n\n\n\n When the Low return on equity<\/strong> this may be an indication that the a lot of capital tied up<\/strong> or the stock levels are very high. This does not necessarily have to be a bad thing; it can also serve to increase security. The key figures also vary depending on the sector.<\/p>\n\n\n\n It is difficult to give an exact guideline. These can vary from sector to sector. In principle, a guideline value of over 10 percent <\/strong>in return on equity. <\/p>\n\n\n\n From an investor's perspective, an investment is only worthwhile if a company's return on equity is at least <\/strong>is as high as the return that investors can achieve through other investments on the capital market in the long term. <\/p>\n\n\n\n The return on equity can be significantly increased if Debt capital <\/a><\/strong>is taken up. This increases a company's total profit, while the amount of equity remains the same.<\/p>\n\n\n\n However, this results in a distortion of the key figure. Although the percentage is significantly higher, this is based on a Indebtedness <\/strong>and not on an increase in profitability. <\/p>\n\n\n\nCalculation of return on equity<\/h2>\n\n\n\n
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<\/figure>\n\n\n\nWhat does the return on equity mean?<\/h2>\n\n\n\n
Return on equity Indicative value<\/h2>\n\n\n\n
Return on equity target value - Influenced by leverage effect<\/h2>\n\n\n\n