Financial ratios
Review liquidity, debt and profitability from your figures.
What the figures mean
- Profit relative to assets (ROA)
Net profit divided by total assets for the selected period. The profit period and asset figures must be comparable.
Simple example: €10,000 profit on €100,000 assets gives 10% for that period, not automatically per year.
- Profit relative to owners’ equity (ROE)
Net profit divided by equity for the selected period. More debt can increase this ratio along with risk.
Simple example: €10,000 profit on €50,000 equity gives 20% for the selected period.
- Owners’ equity
In company accounts, assets less liabilities. In a property investment, your initial equity is your own money; the estimated value of your stake can differ from that amount.
Simple example: Company assets of €100,000 less €60,000 liabilities leave €40,000 of book equity.