Horizon.my

ROE = Net Profit After Tax & Minority Interest / Average Shareholders Funds

ROE is a popular measure of how efficient a company is using its funds to generate income for its shareholders.

Unlike Return on Capital Employed, it does not take into account a company’s gearing position. For example, a company can increase its ROE by borrowing money and investing in assets which generate slightly more return that its borrowing cost. So the more a company gears up, the higher ROE it can achieve if it invests the borrowed funds in assets which generate a higher return compared to the financing cost.

Note: some calculations use Opening Shareholders Funds rather than Average.