Return On Average Equity - ROAE

DEFINITION of 'Return On Average Equity - ROAE'

An adjusted version of the return on equity (ROE) measure of company profitability, in which the denominator, shareholders' equity, is changed to average shareholders' equity. Typically, return on average equity refers to a company's performance over a fiscal year, so the average-equity denominator is usually computed as the sum of the equity value at the beginning and end of the year, divided by two.

BREAKING DOWN 'Return On Average Equity - ROAE'

A measure of return on average equity can give a more accurate depiction of a company's corporate profitability, especially in instances where the value of the shareholders' equity has changed considerably during a fiscal year. In situations where the shareholders' equity does not change or changes by very little during a fiscal year, the ROE and ROAE numbers should be identical, or at least similar.

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RELATED FAQS
  1. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  2. What is the average return on equity for a company in the retail sector?

    The retail sector includes automotive; building supply; distributors; general; grocery and food; online; and special lines ... Read Full Answer >>
  3. What is the average return on equity for a company in the utilities sector?

    The average return on equity (ROE) for the utilities sector is approximately 11%. This is a little below the overall market ... Read Full Answer >>
  4. What is the formula for calculating return on equity (ROE) in Excel?

    The return on equity, or ROE, is used in fundamental analysis to measure a company's profitability. The formula to calculate ... Read Full Answer >>
  5. What is the average return on equity for a company in the automotive sector?

    As of January 2015, the average return on equity, or ROE, for companies in the automotive sector was approximately 17%, which ... Read Full Answer >>
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