Return on Common Stockholders’ Equity

Question

What is the general formula for this?

are they pulled from balance sheet or income statement?

Answer 1

Hi Bobby,

Generally, the Return on Equity is found by:

Net Income / (Average Stockholder's Equity).

It get's more complicated if you are dealing with a company with preferred stock as well. If that's the case you will need to evaluate what earnings are avalible for common shareholders.

Best wishes,

Patrick