Do Stocks With Higher Profitability Earn More? by Bargain Value [munger] Profitability tells us how good a company manages its equity/assets. There are many formulas to count profitability, but they all are quite correlated with each other. Main 3 formulas are: Return on Equity (ROE) = annual net profit / equity Return on Assets (ROA) = annual net profit / total assets Return on Capital Employed (ROCE) = = annual operating profit / (total assets – current liabilities) Capital employed is something between equity and assets. It gathers only those assets, which can be used to create profits (that is why we…
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