This is the percentage a company earns on its total equity in a given year (Year 1, 2, etc.). The calculation is return on assets times financial leverage. Return on equity shows how much profit a company generates on the money shareholders have invested in the firm. The mission of any company is to earn a high return on equity. The company's net income is found in the annual income statement. The company's net worth is taken from the company's annual balance sheet. For example, a major pharmaceutical company earned an incredible 37% on its shareholders' equity. For every $1 shareholders had invested in the company, the company produced $0.37 worth of profit.
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