[BMWE90]

When calculating Return on INvestment (ROI), the formula is Net income/ long-term liabilities + equity. What is equity? Is that total shareholder's equity? or is that just common equity?

[stooken]

shareholders

[jdink]

Originally Posted by BMWE90

When calculating Return on INvestment (ROI), the formula is Net income/ long-term liabilities + equity. What is equity? Is that total shareholder's equity? or is that just common equity?

money you get back on your investment = how much money the investment brings in (net)/how much the investment owes + how much money was put in

i think....

[AndrewAZ]

Originally Posted by BMWE90

When calculating Return on INvestment (ROI), the formula is Net income/ long-term liabilities + equity. What is equity? Is that total shareholder's equity? or is that just common equity?

99% of the time when a finance teacher is talking about equity he/she is referring to shareholders. I think one of the hardest things about fiance is every professor has a little different meaning for each term and you just have to learn it at the beginning.

[BMWE90]

Originally Posted by AndrewAZ

99% of the time when a finance teacher is talking about equity he/she is referring to shareholders. I think one of the hardest things about fiance is every professor has a little different meaning for each term and you just have to learn it at the beginning.

Yeah. I'm just unsure which I'm supposed to use. On the financial reports, it will say something like (this is from Apple's reports)

Shareholder's equity:
Common stock ...
Retained Earnings...
Accumulated other comprehensive income...
Total Shareholder's Equity

So if I'm looking for Return on Equity, am I supposed to use Total Shareholder's Equity or Common stock which is part of equity?

[jaiman]

Originally Posted by BMWE90

Yeah. I'm just unsure which I'm supposed to use. On the financial reports, it will say something like (this is from Apple's reports)

Shareholder's equity:
Common stock ...
Retained Earnings...
Accumulated other comprehensive income...
Total Shareholder's Equity

So if I'm looking for Return on Equity, am I supposed to use Total Shareholder's Equity or Common stock which is part of equity?

Total Shareholder Equity is the complete investment that the owners have in the company. That's what you should use for ROE.

[AndrewAZ]

Originally Posted by BMWE90

Yeah. I'm just unsure which I'm supposed to use. On the financial reports, it will say something like (this is from Apple's reports)

Shareholder's equity:
Common stock ...
Retained Earnings...
Accumulated other comprehensive income...
Total Shareholder's Equity

So if I'm looking for Return on Equity, am I supposed to use Total Shareholder's Equity or Common stock which is part of equity?

You will catch on... Dont sweat it until the test try and learn all the professors terms by then.. It gets tough when your doing accounting and a fin class since items like profit you have accounting profit vs fin profit ect and we analyze stuff different in finance by using NOPAT and other methods that we dont use to analyze junk in accounting and sometimes in accounting you have to chose an answer you know that would be wrong in finance class but its right in accounting.( In terms of analyzing a company)

[BMWE90]

Originally Posted by AndrewAZ

You will catch on... Dont sweat it until the test try and learn all the professors terms by then.. It gets tough when your doing accounting and a fin class since items like profit you have accounting profit vs fin profit ect and we analyze stuff different in finance by using NOPAT and other methods that we dont use to analyze junk in accounting and sometimes in accounting you have to chose an answer you know that would be wrong in finance class but its right in accounting.( In terms of analyzing a company)

I've already taken finance class and passed with 96% in the class. The only thing is that we never really went over ROI and ROE so now I'm a little bit confused. I've asked many people who are majoring in corporate finance and even they dont know for sure.

[AndrewAZ]

Originally Posted by BMWE90

I've already taken finance class and passed with 96% in the class. The only thing is that we never really went over ROI and ROE so now I'm a little bit confused. I've asked many people who are majoring in corporate finance and even they dont know for sure.

I hope your kidding.. Even in basic finance we got drilled on ROI and ROE and like 15-20 other formulas. Even in basic acct we had to learn them all also. Heck my major acct project was taking a company and making an excel spread sheet with 15-20 different things form ROI ROE WACC Turnover ect.

[aznshrek88]

That's because finance is total bullshit, no matter what you analyze or project, you almost will never hit the hammer on the nail, and if you did its because of pure shit luck.

ROI is what you invested ROE is what equity your concerned with, either it be shareholders or the company.

I'm in accounting and I'm currently doing a financial forecasting project and I realize now that this stuff is total bs...I don't understand business anymore, especially since its so easy to play off losses and mess with financial statements in Accordance with GAAP in order to meet with ST goals. My stat teacher told us the Stock Market is a ponzi scheme and I totally agree now.

[AndrewAZ]

Originally Posted by aznshrek88

That's because finance is total bullshit, no matter what you analyze or project, you almost will never hit the hammer on the nail, and if you did its because of pure shit luck.

ROI is what you invested ROE is what equity your concerned with, either it be shareholders or the company.

I'm in accounting and I'm currently doing a financial forecasting project and I realize now that this stuff is total bs...I don't understand business anymore, especially since its so easy to play off losses and mess with financial statements in Accordance with GAAP in order to meet with ST goals. My stat teacher told us the Stock Market is a ponzi scheme and I totally agree now.

Took you that long?

One of the reasons now that I am putting my biz degree on hold and taking science classes next semester and going into medicine. For a while I wanted to run an investment fund but then I realized I probably couldnt sleep at night and thats not the life style for me.