Profitability ratio that calculates the accounting rate of return on stockholders' investment (based on year-end equity). The ratio is calculated as follows:
Net Income (v1750.00)
Common Equity (v2890.00
Accrual-based measures such as Net Income (v1750) and ROE (v6010.00) have limitations: they do not incorporate risk, the time value of money, or investment requirements, and they can be greatly affected by alternative accounting conventions.
A high return on equity does not necessarily imply positive cash flow. Unless cash flow is positive, the company may have difficulty sustaining its Common Dividends (v1900) despite a high ROE (v6100.00).