Your Return On Equity ratio is a key indicator of financial health. This report lets you show the components of that ratio in a unique Excel display.
|by Charley Kyd, MBA
Microsoft Excel MVP
Management reporting is all about communication. Reporting Return On Equity (ROE) is a case in point.
The ROE financial ratio is a key measure of financial health. But to non-financial managers, the ROE can be difficult to understand, for two reasons.
One reason is that people wonder what all the fuss is about. Bean counters create ratios faster than grandmothers bake cookies. So, what’s the big deal about one more ratio?
Slightly over-simplified, your ROE compares directly with your growth rate in sales. If you grow faster than your ROE, you weaken your financial structure; if you grow more slowly than your ROE, you strengthen your financial structure.
Years ago, I wrote two columns for Inc Magazine about the ROE. The columns provide more background about this important measure. You can read them at: Weighing Your Debt Load and How Fast Is Too Fast?
The other reason that using ROE can be difficult is that it’s a top-level ratio that’s affected by virtually every other measure of financial performance. That’s the benefit offered by the Excel report shown above.
Read Full Article: Map Your Financial Health With an Excel DuPont Dashboard