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The return on equity (ROE) is a measure of the profitability of a business in relation to its equity; [1] where: . ROE = Net Income / Average Shareholders' Equity [1] Thus, ROE is equal to a fiscal year's net income (after preferred stock dividends, before common stock dividends), divided by total equity (excluding preferred shares), expressed as a percentage.
DuPont analysis (also known as the DuPont identity, DuPont equation, DuPont framework, DuPont model, DuPont method or DuPont system) is a tool used in financial analysis, where return on equity (ROE) is separated into its component parts.
In the denominator we have net assets or capital employed instead of total assets (which is the case of Return on Assets). Capital Employed has many definitions. In general it is the capital investment necessary for a business to function.
Return on tangible equity (ROTE) (also return on average tangible common shareholders' equity (ROTCE)) measures the rate of return on the tangible common equity.. ROTE is computed by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders' equity. [1]
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The return, or the holding period return, can be calculated over a single period.The single period may last any length of time. The overall period may, however, instead be divided into contiguous subperiods. This means that there is more than one time period, each sub-period beginning at the point in time where the previous one ended. In such a case, where there are
Free cash flows to the firm are those distributed among – or at least due to – all securities holders of a corporate entity (see Corporate finance § Capital structure); to equity, are those distributed to shareholders only. Where the latter are dividends then the dividend discount model can be applied, modifying the formula above.
Cash return on capital invested [1] (CROCI) is an advanced measure of corporate profitability, originally developed by Deutsche Bank's equity research department in 1996 (it now sits within DWS Group).