« What Type Of Stock Should You Buy? | Home | How to Use Astrology to Choose Good Investments »
Return on Equity vs. Return on Capital
By qwcdirect | April 22, 2010
The return on equity is the measure of how cheap a company is in terms of its profit whereas return of capital is the measure of the efficiency of the company on the use of its resources in the generation of those profits. When the two are combined together, they form the basis behind the strategy of a good and sound business. It is important for any company to decide on how to get the capital at the same time how to use the capital that has been made available for the company. There are several ways of measuring the return on capital and the simplest way and the one that is widely used is the return on assets.
The return on equity is the profit earned on every money on the dollar capital, which means each dollar that you own of the company. When comparing firms, the return on assets is used.
Topics: Finance, Investments | No Comments »