Question

Fo fal desf fo fo tad assats uhuc is as a Parcatnge Pinpose t susel o Judemne th Finaal rim oy Company 3is easy Dest rati to under stand bn Invesbrs and shere hsl deps aesy 2 What is the difference between return on assets and return on equity and who is interested in which key ratio?

Answer 1

Return on assets is calculated by dividing net income from the total average assets. It is used to assess the return company generated out of its average assets. It is used mainly by the investors and lenders.

Return on equity is calculated by dividing net income from the shareholders equity. It is used to assess the return company generated out of its shareholders equity. It is used mainly by the equity shareholders and other institutional investors.