The return on net assets can measure the efficiency of a company using the capital invested by shareholders. Make up for the lack of after-tax profit per share. For example. After the company distributes bonus shares to the original shareholders, the earnings per share will decrease, thus creating the illusion that the company's profitability will decrease among investors. In fact, the profitability of the company has not changed, so it is more appropriate to analyze the profitability of the company with the return on net assets.
If the annual target value of ROE is 2.8%, it is reasonable for ROE to be 1.6% by the end of April. The return on equity will increase over time (assuming that the monthly net profit is positive).
Second, how to calculate the return on net assets?
The calculation formula of return on net assets is:
Return on net assets = net profit/average net assets 100%
Among them, average net assets = (net assets at the beginning of the year and net assets at the end of the year) /2.
The denominator of this formula is "average net assets", and "net assets at the end of the year" can also be used. For example, the return on equity of a company that publicly issues shares can be calculated according to the following formula:
Return on net assets = net profit/year-end shareholders' equity 100%
Dupont formula:
Return on assets (ROE)= net profit/net assets = net sales rate, asset turnover rate and equity multiplier (financial leverage)
Net profit margin of sales = total profit/sales revenue (profitability)
Asset turnover rate = sales revenue/total assets (operating capacity)
Equity multiplier = total assets/net assets (solvency)
Three. Analysis of return on equity
Enterprise assets include two parts, one is shareholders' investment, that is, the sum of owners' equity (shareholders' investment equity, enterprise reserve fund and retained earnings). ).), and the other part is the funds borrowed and temporarily occupied by enterprises. Appropriate use of financial leverage by enterprises can improve the efficiency of capital use. Excessive borrowing will increase the financial risk of enterprises, but it can generally increase profits. Borrowing too little will reduce the efficiency of capital use. Return on net assets is an important financial indicator to measure the efficiency of shareholders' capital use.
The ROE index reflects the income level of shareholders' equity and is used to measure the efficiency of the company's use of its own capital. The higher the index, the higher the return on investment. This indicator reflects the ability of self-owned capital to obtain net income. Generally speaking, the increase of debt will lead to the increase of return on net assets.
Related questions and answers: ROE calculation formula introduction of ROE calculation formula 1, ROE = net profit/net assets. 2. Among them, net profit = after-tax profit+profit distribution; Net assets = owner's equity+minority shareholders' equity 3. Of course, if there is no profit distribution or business combination, net profit = after-tax profit and net assets = owner's equity, then the return on net assets = after-tax profit/owner's equity. 4. In DuPont analysis, the calculation of return on assets will be decomposed step by step to get some series of indicators, so the return on equity will be calculated in turn through other indicator formulas.