The calculation formula of ROE is: net profit/net assets x 100%. Among them, net profit refers to the after-tax profit of the company, and net assets refers to the owner's equity of the company MINUS other owners' equity.
The meaning of weighted return on equity
Weighted return on net assets is to weight net assets according to different capital sources when calculating return on net assets. This weighting method considers the influence of different capital sources on the company's profit and return on investment.
The formula for calculating the weighted return on equity is: (net profit 1x weight 1+ net profit 2x weight 2+...+ net profit nx weight n)/ (net assets 1x weight 1+ net assets 2x weight 2+...+ net assets nx weight n) x1.
The meaning and significance of ROE and ROE weight are introduced below respectively.
1. Importance of ROE
Return on net assets is an important index to evaluate the company's operating performance and shareholder return. It can help investors understand the profitability and efficiency of the company. High return on net assets means that the company can effectively use shareholders' capital and resources and create more profits. Low ROE may indicate that the company's asset allocation is unreasonable or its profitability is weak.
ROE can also be used to compare the performance of different companies in the same industry. Higher return on equity of companies in the same industry usually means that they are more competitive and profitable.
2. The significance of weighted return on equity
The weight of ROE takes into account the importance of different capital sources, which further deepens the analysis of ROE. Different sources of capital may have different effects on the company's profits and return on investment. For example, borrowing funds may lead to an increase in financial costs, thus reducing the return on equity.
Weighted return on equity can help investors understand the company's profits and return on investment more comprehensively. By weighting different sources of capital, the weighted return on equity can more accurately evaluate the company's performance and shareholder returns.
3. Calculation method of weighted return on equity
The method of calculating the weighted return on net assets is to determine the weight according to different sources of funds, multiply the weight by the net profit and net assets respectively, then add the products to get the weighted net profit and net assets, and finally divide by 100% to get the weighted return on net assets.
The weight can be determined according to the proportion of capital sources, such as the proportion of shareholder capital and loan capital. The determination of weight needs to be analyzed and calculated according to the company's specific situation and financial statements.
4. Comparison between ROE and weighted ROE
Return on equity and weighted return on equity are both indicators to measure the company's profit and return on investment, but the importance of different sources of funds is considered in the calculation of weighted return on equity. The weighted return on equity can evaluate the company's performance and shareholder's return more comprehensively.
ROE is mainly used to compare the performance of different companies, and weighted ROE can help investors to understand the company's profits and return on investment more comprehensively.
conclusion
Return on net assets is an important financial indicator to measure the profitability and efficiency of a company. The weighting of ROE is to weight the net assets according to different capital sources when calculating ROE. The weighted return on equity can help investors understand the company's profits and return on investment more comprehensively, and evaluate the company's performance and shareholder's return more accurately. In investment decision-making, the analysis of return on equity and weighted return on equity is a very valuable reference index.