The financial profitability ratio ROE (return on equity) measures the net profit generated by the investments made by the owners of the company. (ROE = Net Profit% B / C.Propios). It is therefore very useful for the partners or shareholders because they can assess and compare their investments with other investment options.
In order to obtain a greater degree of analysis can decompose the financial return on several factors (see formulas in the attached image, click to enlarge), which will be useful for the managers of the company, because they will act on the variables important, or the combination thereof, in order to obtain maximum profitability.
On one side are the ratios that depend on economic management:
• Asset Turnover (Sales / Assets)
• Margin (EBIT / Sales)
And secondly, financial management ratios:
• Financial leverage. (Active / C.Propios x EBT / EBIT)
• Tax effect (Net profit / BAI)
The value of these ratios depend on the financial structure and management of the company itself, but also the sector to which it belongs. For example, industrial companies with large assets, the rotation of the same will be low, so that the origin of your benefit will be the margin and the other variables. In service companies, with small active volume, turnover is high and therefore the profit will come through this route.
The Excel application calculates the four components from the pooled data of balance and income statement.
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