Using the deterministic factor systems in the analysis of return on equity

Abstract

The article contains theoretical reflections on the relevance of the analysis of the profitability of shareholders equity. Return on equity reflects the efficiency of the administrative apparatus of the Organization and is of particular value to assess the investment attractiveness of the organizations. This article provides deterministic multi-factor models, reflecting the influence of various factors on return on equity.When analyzing the profitability of equity is appropriate use of borrowed capital, because most organizations in its activities are also using the borrowed capital, which affects the amount of shareholders equity. In practice, when analyzing the effectiveness, return on equity should be compared with the value of bank interest on the deposit. If the ratio of net profits to its equity below or equal the profitability of bank deposits, the business of the organization is not efficient. The aim of this work is the analysis of models of calculation of profitability of shareholder equity and the selection of optimum and versatile methods of calculation. Application of quantitative and qualitative indicators in the analysis allows to evaluate the efficiency of use of own capital.

Keywords: Return on equity, profitability analysis, cost-benefit analysis model of equity, equity, capital efficiency