Forum Archive Index - March 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

>
>
>Nevertheless despite the improved performance, return on 
>shareholders equity was only 8829/121918 = 7.2% (according to my 
>calculations).  So there aren't huge margins to be made in this 
>business.
>
>
Ooops, I think a correction might be due to my Return on Equity 
figure above.  The above figures are for the half year ended 
31/12/2001

To calculate a company's return on equity you must 
take the net profit for the year and divide it by the average 
shareholders equity over that time period.   As a first 
approximation for average shareholders equity you can use the 
shareholders equity as listed in the report at the time the profit 
announcement is made (assuming shareholders equity doesn't change 
drastically throughout the year).  The net profit figure I have used 
above is for a half year only.  On an annualised basis this should 
be doubled so the actual ROE is a respectable 14.4%.  Can that ROE be 
sustained into the future?   Any comments?  SNOOPY







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