July 2019
Beginner
292 pages
6h 32m
English
Return on average equity (ROAE): This is calculated as follows:

In the preceding equation, PAT refers to the profit after tax. The ratio uses the net income or PAT rather than the EBIT, since interest and tax have to be paid before arriving at the profit attributable to the equity holders.
Rearranging the accounting equation Assets = Liabilities + Equity, you get Equity = Assets – Liabilities.
This is an alternative way of determining equity. Return on equity measures how efficiently and profitably the company uses its equity capital.
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