II. Return on Investment
1. Return on Assets (ROA)
This ratio measures the operating efficacy of a company without regards to financial structure
Formula 7.21
Return on assets = (net income + aftertax cost of interest) average total assets OR
Return on assets = earnings before interest and taxes
Where: 
2. Return on Common Equity (ROCE)
This ratio measures the return accruing to common stockholders and excludes preferred stockholders.
Formula 7.22
Return on common equity = (net income  preferred dividends) average common equity
Where: 
3. Return on Total Equity (ROE)
This is a more general form of ROCE and includes preferred stockholders.
Formula 7.23
Return on total equity = net income average total equity
Where: 
4. Return on Total Capital (ROTC)
Total capital is defined as total stockholder liability and equity. Interest expense is defined as the total interest expense excluding any interest income. This ratio measures the total return the company generates from all sources of financing.
Formula 7.24
Return on total capital = (net income + interest expense) average total capital 
Operating Efficiency Ratios

Investing
What Is Stockholders' Equity?
Stockholders’ equity represents the equity that shareholders own in a company. 
Investing
Key Financial Ratios to Analyze Investment Banks
Find out which financial ratios are most useful when analyzing an investment bank, and why tracking capital efficiency is especially important. 
Investing
What Are The Main Differences Between Return On Equity (ROE) and Return On Assets?
Return on equity and return on assets are important measures for evaluating how well a company manages the capital its shareholders entrust to it. 
Investing
ROA And ROE Give Clear Picture Of Corporate Health
Both measure performance, but sometimes they tell a very different story. This is why they’re best used together. 
Investing
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Investing
ROA and ROE Give Clear Picture Of Corporate Health
ROE indicates if a company’s value is growing at an acceptable rate. ROA reveals how much profit a company earns for every dollar of assets. 
Managing Wealth
Understanding Total Returns
Total return measures the rate of return earned from an investment over a period of time. 
Investing
Analyzing Oracle's Debt Ratios in 2016 (ORCL, SAP)
Learn how the debt ratio, debttoequity ratio and debttocapital ratio are used to evaluate Oracle Corp.'s liabilities, equity and assets. 
Markets
The Different Between Preferred and Common Stock
Preferred and common stocks are different in two key ways. 
Investing
Total Debt to Total Assets
Total Debt to total assets, also called the debt ratio, is an accounting measurement that shows how much of a company’s assets are funded by borrowing. In business, borrowing is also called leverage.