The common shares are trading in the stock market for $15 per share. refer to the financial statements of flathead lake manufacturing company. the firm's return on equity ratio for 2020 is 20%.
Flathead Lake Manufacturing Company's return on equity is calculated by dividing its net income by its total equity.
Net Income / Total Equity = Return on Equity
For Flathead Lake Manufacturing Company in 2020, this calculation would be:
$15 (per share) x 20% (ROE) = $3 (net income per share) / $15 (total equity per share) = 0.20 or 20% (return on equity)
The ratio of a company's net income to the equity of its shareholders is known as return on equity (ROE). A company's profitability and the effectiveness of its revenue generation are measured by its return on equity (ROE).
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