Return on net assets (ROE) is the percentage of net profit and average shareholders' equity, which is the percentage rate obtained by dividing the company's after-tax profit by its net assets. This indicator reflects the income level of shareholders' equity. The following is the appropriate ROE compiled by Bian Xiao, hoping to help everyone.

What is the appropriate rate of return on net assets?

Generally speaking, the ROE recommendation is 15%~39%. If the ROE is greater than 39%, it may be caused by fraud or unstable factors, which investors can ignore. If the return on net assets is less than 15% or lower, it means that the management of the company does not have the ability to do actual manipulation, which means that it is not responsible for shareholders' money and needs careful consideration.

However, different industries and enterprises have different profit rates, and the return on net assets is also different. If the rate of return on net assets is on the rise, it means that the enterprise is in the stage of rapid growth, but we also need to consider how long the space and cycle of rapid growth can last.

Generally speaking, ROE can reflect a company's profitability and judge whether a stock has investment value. Therefore, investors should judge a company's profitability not only by its net profit, but also by its return on net assets.

What does ROE mean?

Return on net assets (ROE), so the profitability of these indicators is high. It can be said that the higher the profitability of blue-chip companies, the higher the profitability.

The calculation of "%"indicated in this manual, EPS)÷ 100÷ 1 of basic shareholders' equity becomes the issue quantity, which is fixed at 2-3%. If it exceeds 10%, it means high profitability. As can be expected, as well as the dividends paid by shareholders, the growth of the enterprise is strong.

When you figure out the problem of blue-chip stocks in this return on net assets (= buying stocks), your company's financial situation should also be checked.

For example, even if sales temporarily increase and income such as land increases, it is not certain that the company has grown, because it is not a continuous income.

Calculation method of return on net assets index

Return on net assets is also called return on fund net assets or return on interest. There are two ways to calculate this index: one is the all-round diluted return on net assets; The other is the weighted average return on equity. Different calculation methods calculate different ROE indicators, so it is very important to choose which method to measure ROE.

The characteristics of ROE indicators obtained by the first and second calculation methods are compared.

Rate of return on fully diluted net assets = net profit during the reporting period ÷ net assets at the end of the period —— (1)

Weighted average return on equity = net profit during the reporting period ÷ average net assets ——————————— (2)

In the calculation method of all-round diluted return on net assets (1), the molecular structure is a stage series and the denominator is a time series. Obviously, numerator and denominator are two indicators of total output, which have different characteristics, but they are related to some extent. The relatively calculated return on net assets should be a compressive strength index, which is used to reflect the compressive strength of the situation, indicating that the net assets of the enterprise enjoy the operating net profit at the end of the period.

In the calculation method of weighted average return on net assets (2), the net profit of molecular structure is presented by the denominator net assets, and the increase or decrease of net assets will lead to the increase or decrease of net profit. According to the characteristics of average index, it can be distinguished that the result calculated by the weighted average return on net assets method (2) is a average index, which shows that the net assets of enterprises constitute the general level of net profit.

Two, the two calculation methods to calculate the return on net assets indicators have more meanings.

Because of the different characteristics of ROE index calculated by the two calculation methods, their meanings are also different.

The indicator calculated in the calculation method of fully diluted return on net assets (1) refers to the situation at the end of the year, which is a static data indicator, indicating that the net assets at the end of the enterprise enjoy the * * * part of the operating net profit, which can well predict the future stock valuation. Therefore, it is particularly important to clarify the price of individual stocks when companies issue stocks or trade stocks. In addition, the fully diluted ROE is the key factor that damages the company's use value index, and is often used to analyze the ROE per share.

The index calculated in the calculation method of weighted average return on net assets (2) is a dynamic index, which indicates how much profit the operator has created for the company by using the net assets of the enterprise during the operation period. This is a average index in which the company's net assets are used to represent the company's profitability, which is conducive to the relevant shareholders of the company to properly distinguish the company's future operating ability.

Three, the calculation and selection of return on net assets index

Because the ROE indicator is a comprehensive indicator.

From the perspective of financial information application of operators, the ROE index calculated in the calculation method of weighted average ROE (2) should be applied, which reflects the comprehensive management ability in the past year and is extremely important for operators to make operational management decisions. Therefore, the company should choose the weighted average return on net assets when analyzing the accounting situation of enterprises by using DuPont financial statement analysis management system. In addition, you can choose to evaluate the operator's performance.

From the perspective of external shareholders, the ROE index calculated by the fully diluted ROE calculation method (1) should be applied, only based on the uniqueness of the joint-stock company: the shareholders of the new company should invest in assets exceeding the par value and gain the influence of the same share, and the shareholders at the end of the period have the same control over the profits of this year. Because of this, the Standard of Contents and Formats of Information Disclosure of Public Joint-stock Companies No.2: Contents and Formats of Annual Reports published by China Securities Regulatory Commission requires that the total dilution method be used to calculate the return on net assets. The rate of return on net assets calculated by omni-directional dilution method is more suitable for shareholders to distinguish the buying and selling prices of company stocks, so the financial information released to shareholders of the company should choose the index calculated by this method.