This ratio shows the relation between the net profit after tax and shareholders funds. This ratio judges whether the firm has turned a satisfactory return to it’s shareholders or not. Generally the higher ratio shows the efficient utilization of owner’s funds and vice-versa. It is calculated by following formula.
Net Profit after Tax
ROE = Shareholder’s Equity
Where,
Shareholders Equity = Share Capital + Reserve
Table No.8: Calculation of ROE
| Year | Net Profit | Shareholders’ Equity | ROE |
| 2061/62 | 57,386,634 | 689,013,060 | 8.33% |
| 2062/63 | 117,001,973 | 982,373,728 | 11.91% |
| 2063/64 | 254,908,844 | 1,163,290,851 | 21.91% |
| 2064/65 | 247,770,758 | 1,414,644,812 | 17.51% |
| 2065/66 | 316,373,495 | 1,712,607,195 | 18.47% |
| Average Ratio | 15.63% | ||
Source: Annual Report, Nepal SBI Bank Ltd
Trend Diagram 5: Position of ROE
The table and figure given above describes that the ROE is in increasing trend in the year 2061/62 to 2063/64 and it decreases in year 2064/65. Then again it increases. The highest ROE was in the year 2063/64(i.e. 21.91%) and the lowest in the year 2061/62 (i.e. 8.33%). The average ROE for the study period was 15.63% which shows that the management is capable in better utilization of capital employed.
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