Return on common equity
What is Return on common equity?
Return on common equity is Net income before discontinued operations excluding Preferred dividends divided by the average of Common equity, total for the last period. Note: if the Common equity, total is negative, the ratio will be empty or non-existent.
(Net income before discontinued operations - Preferred dividends) / Average common equity
What does Return on common equity (ROCE) mean?
ROCE is a profitability ratio that measures the net income available for distribution to common shareholders per dollar of the average book value of common shareholders’ investments. The value shows the percentage of net income a company generates for every dollar invested in common equity capital. Investors use ROCE to evaluate how efficiently a company’s management has utilized common equity capital to generate a profit. A high value of ROCE indicates that the company’s management is making good use of equity capital by investing it in profitable fields. The difference from Return on equity (ROE) is that Return on common equity (ROCE) measures the return on common equity only rather than the return on both the preferred equity and common equity.