Return on Common Equity Calculator

✖Net Income represents the amount of money that a company has earned after deducting all expenses, taxes, interest, and other costs from its total revenue during a specific period.ⓘ Net Income [NI]			+10% -10%
✖Preferred Dividends are the dividends that a company is obligated to pay to its preferred shareholders before distributing any dividends to common shareholders.ⓘ Preferred Dividends [PD]			+10% -10%
✖Average Common Equity is a financial metric used to measure the average value of common shareholders' equity over a specific period.ⓘ Average Common Equity [ACE]			+10% -10%

✖Return on Common Equity is a financial ratio that measures a company's profitability and efficiency in generating returns for its common shareholders' equity.ⓘ Return on Common Equity [RCE]

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Formula

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Return on Common Equity

Formula

RCE = \frac{NI - PD}{ACE}

Example

2.052632 = \frac{1065 - 675}{190}

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Return on Common Equity Solution

STEP 0: Pre-Calculation Summary

Formula Used

Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity
RCE = (NI-PD)/ACE
This formula uses 4 Variables

Variables Used

Return on Common Equity - Return on Common Equity is a financial ratio that measures a company's profitability and efficiency in generating returns for its common shareholders' equity.
Net Income - Net Income represents the amount of money that a company has earned after deducting all expenses, taxes, interest, and other costs from its total revenue during a specific period.
Preferred Dividends - Preferred Dividends are the dividends that a company is obligated to pay to its preferred shareholders before distributing any dividends to common shareholders.
Average Common Equity - Average Common Equity is a financial metric used to measure the average value of common shareholders' equity over a specific period.

STEP 1: Convert Input(s) to Base Unit

Net Income: 1065 --> No Conversion Required
Preferred Dividends: 675 --> No Conversion Required
Average Common Equity: 190 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

RCE = (NI-PD)/ACE --> (1065-675)/190

Evaluating ... ...

RCE = 2.05263157894737

STEP 3: Convert Result to Output's Unit

2.05263157894737 --> No Conversion Required

FINAL ANSWER

2.05263157894737 ≈ 2.052632 <-- Return on Common Equity

(Calculation completed in 00.004 seconds)

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Created by Aashna

IGNOU (IGNOU), India

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Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

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< 5 Financial Modeling and Valuation Calculators

Return on Common Equity

Go Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity

Segment Debt Ratio

Go Segment Debt Ratio = Segment Liabilities/Segment Assets

Segment Turnover

Go Segment Turnover = Segment Revenue/Segment Assets

Segment Margin

Go Segment Margin = Segment Profit/Segment Revenue

Segment Roa

Go Segment Roa = Segment Profit/Segment Assets

Return on Common Equity Formula

Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity
RCE = (NI-PD)/ACE

What is Return on Common Equity ?

Return on Common Equity is a key financial metric that measures the average value of common shareholders' equity over a specific period. It is used in financial analysis to evaluate a company's financial position, performance, and efficiency in generating returns for common shareholders. Average Common Equity provides insights into the shareholders' stake in the company and influences capital allocation decisions. However, analyzing and interpreting Average Common Equity requires consideration of various factors, including changes in equity components and reporting practices. Average Common Equity provides insights into the financial position and capital structure of a company. It represents the shareholders' stake in the company's assets after accounting for liabilities.

How to Calculate Return on Common Equity?

Return on Common Equity calculator uses Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity to calculate the Return on Common Equity, Return on Common Equity represents the average value of common shareholders' equity over a specific period. Return on Common Equity is denoted by RCE symbol.

How to calculate Return on Common Equity using this online calculator? To use this online calculator for Return on Common Equity, enter Net Income (NI), Preferred Dividends (PD) & Average Common Equity (ACE) and hit the calculate button. Here is how the Return on Common Equity calculation can be explained with given input values -> 2.052632 = (1065-675)/190.

FAQ

What is Return on Common Equity?

Return on Common Equity represents the average value of common shareholders' equity over a specific period and is represented as RCE = (NI-PD)/ACE or Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity. Net Income represents the amount of money that a company has earned after deducting all expenses, taxes, interest, and other costs from its total revenue during a specific period, Preferred Dividends are the dividends that a company is obligated to pay to its preferred shareholders before distributing any dividends to common shareholders & Average Common Equity is a financial metric used to measure the average value of common shareholders' equity over a specific period.

How to calculate Return on Common Equity?

Return on Common Equity represents the average value of common shareholders' equity over a specific period is calculated using Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity. To calculate Return on Common Equity, you need Net Income (NI), Preferred Dividends (PD) & Average Common Equity (ACE). With our tool, you need to enter the respective value for Net Income, Preferred Dividends & Average Common Equity and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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