Return on equity = net profit/net assets × 100%, also known as return on shareholders' equity. This indicator reflects how much profit can be generated from the funds invested by shareholders.
What is obtained is a negative value, indicating the return brought to shareholders by the net assets owned and controlled by the company.
If both are negative numbers, then the return on equity has no meaning in calculation.
If only the net profit is negative, then the return on equity is negative. But when both are negative, it means that the company is losing assets, and there is no need to pay attention to the return on equity.
The return on equity is the percentage rate obtained by dividing the company's after-tax profit by its net assets. If the net profit is a negative number, there is no after-tax profit.
When the net assets are 0, there is no net assets, so how can the return on equity come from? Moreover, the net assets are negative, which are essentially net liabilities.
For example: a person without any assets borrowed 200 yuan, bought 10 items, and sold 4 items for 25 yuan each, which is equivalent to making 20 yuan for these 4 items. At this time, his profit is 20 yuan, and the profit rate is 25% (ie 20/80). At this time, his net worth is -60 (20 yuan income + the remaining 6 liabilities of 120 yuan-200 yuan = -60 yuan). Equivalent to net debt of 60 yuan.
Extended information:
Net assets are affected by the owner’s original investment, additional investment, subsequent profits and losses of the enterprise group, and the amount withdrawn from rolled-over profits or investments, etc. influence. In the basic data of this plan, only tangible assets are included in order to reflect the size of shareholders' equity and credit risk of the enterprise group. As for intangible assets such as corporate group reputation and patent rights, they are not included in the calculation for the time being.
Considering that the comprehensive strength evaluation should reflect the actual sustained and steady development of the enterprise group, the net assets are calculated based on the three-year-end average. That is:
Net assets = (net assets at the end of this year + net assets at the end of the previous year + net assets at the end of two years ago) ÷3
The year definition in the calculation formula is the same as the turnover .
If the entity view of profits is adopted, net assets are equal to shareholders' equity plus claims; if the ownership view of profits is adopted, net assets are equal to shareholders' equity.
Baidu Encyclopedia-Net Worth