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Return on Common Equity Formula

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Return on Common Equity is a financial ratio that measures a company's profitability and efficiency in generating returns for its common shareholders' equity. Check FAQs

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

RCE - Return on Common Equity?NI - Net Income?PD - Preferred Dividends?ACE - Average Common Equity?

Return on Common Equity Example

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Here is how the Return on Common Equity equation looks like with Values.

Here is how the Return on Common Equity equation looks like with Units.

Here is how the Return on Common Equity equation looks like.

2.0526 = \frac{1065 - 675}{190}

2.0526 = \frac{1065 - 675}{190}

2.0526 = \frac{1065 - 675}{190}

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Return on Common Equity Solution

Follow our step by step solution on how to calculate Return on Common Equity?

FIRST Step Consider the formula

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

Next Step Substitute values of Variables

∴

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

Next Step Prepare to Evaluate

∴

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

Next Step Evaluate

∴

RCE = 2.05263157894737

LAST Step Rounding Answer

∴

RCE = 2.0526

Return on Common Equity Formula Elements

Variables

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.

Symbol: RCE

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Return on Common 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.

Symbol: NI

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Net Income

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.

Symbol: PD

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Preferred Dividends

Average Common Equity

Average Common Equity is a financial metric used to measure the average value of common shareholders' equity over a specific period.

Symbol: ACE

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Average Common Equity

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How to Evaluate Return on Common Equity?

Return on Common Equity evaluator uses Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity to evaluate 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 evaluate Return on Common Equity using this online evaluator? To use this online evaluator for Return on Common Equity, enter Net Income (NI), Preferred Dividends (PD) & Average Common Equity (ACE) and hit the calculate button.

FAQs on Return on Common Equity

What is the formula to find Return on Common Equity?

The formula of Return on Common Equity is expressed as Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity. Here is an example- 2.052632 = (1065-675)/190.

How to calculate Return on Common Equity?

With Net Income (NI), Preferred Dividends (PD) & Average Common Equity (ACE) we can find Return on Common Equity using the formula - Return on Common Equity = (Net Income-Preferred Dividends)/Average Common Equity.

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Return on Common Equity Formula

Return on Common Equity Example

Return on Common Equity Solution

Return on Common Equity Formula Elements

Other formulas in Financial Modeling and Valuation category

How to Evaluate Return on Common Equity?

FAQs on Return on Common Equity

Variable Name