Definition: return on equity
Return on equity is the ratio of a company's profit to equity. As a rule, the net income of the last year reported is used for the calculation.
Significance for the evaluation
The higher the return on equity, the more economically a company operates. A high return on equity can be seen as protection against bad times.
We rate a return on equity of more than 15% as positive.
Calculation
Return on equity in % = (net income / equity) * 100
Example
Lufthansa (on April 16, 2019): return on equity = (2,196 million / 9,573 million) * 100 = 22.94%
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