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Return on equity - Dupont Model Net income/equity · Net income equity (real)
This report has been restructured for a better visualization of the accounting-administrative procedure.
It combines the income statements and the consolidated balance sheet to graphically view the structure of the company.
Nowadays, CEOs take a series of decisions that affect each and every phase of the business, just as the threads
move a puppet. The result of those decisions is Return on equity, and if it increases from month to month, the result is better.
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Financial ratios Return on equity
Current year (moving average)
· Net income/equity · Net income equity (real)
The Return on equity in two ways:
Net income over equity
The Return on equity of the company is measured with this ratio, which is calculated by dividing the 12-month moving average of the Net profit by the Equity of the month.
Net income over actual equity
In this ratio, the inflation is deduced to the Net income over equity ratio. Although this test is extremely hard for any company, it must be taken into account or the company may become undercapitalized.
The Net (actual) income should be higher than the inflation.
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