Pleasingly, Coca-Cola has a superior ROE than the average (17%) in the Beverage industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. Does Coca-Cola Have A Good Return On Equity?īy comparing a company's ROE with its industry average, we can get a quick measure of how good it is. One way to conceptualize this is that for each $1 of shareholders' capital it has, the company made $0.37 in profit. The 'return' is the income the business earned over the last year. So, based on the above formula, the ROE for Coca-Cola is:ģ7% = US$9.9b ÷ US$27b (Based on the trailing twelve months to March 2023). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity ROE can be calculated by using the formula: View our latest analysis for Coca-Cola How Is ROE Calculated? In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. By way of learning-by-doing, we'll look at ROE to gain a better understanding of The Coca-Cola Company ( NYSE:KO). While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important.
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