Return on Equity
Also known as ROE, return on equity is computed by taking net profit (after taxes) and dividing it by the total equity. Consider a firm with $3000 in net profit after taxes, and $12,500 in equity. It would have a ROE of $3,000/$12,500 or 24 percent. Return on Equity is one of the ratios used in the Dupont Model of financial performance.