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What is egenkapitalforrentning?

Return on equity is a key figure that shows how much a company's owners get in return on the capital they have invested in the company. It is often used to assess how effectively management utilizes equity to generate profits.

Return on equity is typically calculated as:

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What exactly is return on equity?

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Egenkapitalforrentning is a key figure that shows how much a company's owners get in return on the capital they have invested in the company. It is often used to assess how effectively management utilizes equity to generate profits.

Beregning

Return on equity is typically calculated as:

 Return on equity = (Year's result / Average equity) × 100 

Hvor:

  • This year's result er virksomhedens resultat efter skat.
  • Average equity is the average of the equity at the beginning of the year and at the end of the year.

Fortolkning

A high return on equity means that the company is good at creating a profit from the capital the owners have tied up in the company. A low or negative return on equity can conversely indicate that the capital is not being used efficiently or that the company has had a loss.

However, it is important to compare the ratio with companies in the same industry, as the capital structure and risk level can vary greatly.

Example

If a company has a result after tax of DKK 2 million. DKK and an average equity of DKK 10 million. DKK, the return on equity becomes:

 (2.000.000 / 10.000.000) × 100 = 20 % 

This means that the owners have received a return of 20% on their invested capital.

Anvendelse

Investors, banks and owners use return on equity to:

  • Assess whether the company provides an attractive return compared to alternative investments.
  • Analysere virksomhedens historiske udvikling i afkastet.
  • Compare companies in the same industry.

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