The return on equity, or ROE, is used in fundamental analysis to measure the profitability of the company. ROE determines the amount of net profit the company generates its own capital. Caviar can be used to compare the profitability of one company to another company in the same industry.
The RBE calculation in Excel
The formula for calculating the company’s ROE is its net profit divided by equity capital. Here’s how to use Microsoft Excel to set up the calculation for roe.
In Excel, start with right-click on columns A, B and C. then click the left button of the mouse on the width of the column and change the value to 30 for each of the columns. Then click OK.
After that, enter company name in cell B1 and another company name in cell C1.
Next, Enter the “net income” in cell A2, “equity” in cell A3 and “ROE” in cell A4. Once this is completed, enter the appropriate values for these descriptions are in cells B2, B3, C2 and C3.
For example, Facebook (FB) has a net income of $ 15.920 billion dollars and equity capital 74.347 billion as of Dec. 31 2017, while its competitor, Twitter (market), net income -$108.063 million, and shareholders ‘ equity 5.047 billion.
To set up the calculation for this example:
Type =15920000000 in cell B2 and =74347000000 in cell B3. Next, Enter the formula =B2/B3 in cell B4. As a result, the return on equity Facebook is 21.41%. Then enter =-108063000 in cell C2 and =5047218000 in cell C3. Next, Enter the formula =C2/C3 in cell C4. As a result, the ROE Twitter -2.14%. Twitter is less profitable and unprofitable, while Facebook is highly profitable.