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THIS IS PART OF THE QUESTION THAT WAS DONE IN POST 73836

Select two companies from the same industry. Using the annual report information available on the company's website compute the ROE for each company. However, I AM HAVING A DIFFICULT TIME CALCULATING
These two companies were choosing

AND

Yahoo (NASDAQ: YHOO)- 24.21%

I want to understand the full concept of this. I look at both Google and Yahoo, yet I cannot comprehend what figures you use to get those %. I can see those % yet I do not understand what figures was use to compute the ROE OF EACH COMPANY

#### Solution Preview

Student:

The formula for ROE is very simple. It is calculated by:

Net profit/ Shareholder's equity

The above mentioned percentages for the two companies were taken from the Yahoo finance pages for both the companies, which you also found as per my instructions. However, the information needed to calculate those percentages are available in the income statement as well as the balance sheet in the sense that Net Profit for the year is a component of the income statement and Shareholder's equity can be taken from the liabilities side of the Balance Sheet.

I will depict the solutions below. Please note one thing that the percentages given before and calculated from the figures taken from the Balance Sheet/Income statement may vary because there are various methods with minor modification to calculate Return on Equity. For example, some people use Shareholder's equity at the end of the year to calculate ROE ...

#### Solution Summary

Select two companies from the same industry. Using the annual report information available on the company's website compute the ROE for each company.

\$2.19