Skip to main content
assistive.skiplink.to.breadcrumbs
assistive.skiplink.to.header.menu
assistive.skiplink.to.action.menu
assistive.skiplink.to.quick.search

Return On Equity = ROE

Created by Arthur Aslanyan (Nafta College), last modified on Oct 26, 2023

You are viewing an old version of this page. View the current version.

Compare with Current View Page History

Ratio of Net Income to the Total Equity:

$\begin{array}{l}\displaystyle \mbox{ROE} = \frac{\mbox{Net} \ \mbox{Income}}{\mbox{Total} \ \mbox{Equity}}\end{array}$

The usual practise is to give preferences to the Investment Projects with higher IRR and make a direct comparison of IRR against the Weighted Average Cost of Capital (WACC).

The corporate investment policy usually dictates that:

Investment Projects with IRR < WACC should be rejected
Investment Projects with higher IRR should have a financing priority over the Investment Projects with lower IRR

See also

Economics / Investment / Financial Investment / Financial Investment Metrics

[ Financial Investment Project ]

[ Weighted Average Cost of Capital (WACC) ] [ Cash Discount ] [ Net Present Value (NPV) ]

[ Modified Internal Rate of Return (MIRR) ]

No labels