Return on Common Equity is defined as:
Return on Common Equity = Net Income To Common / Average Total Common Equity
Return on Common Equity for GSK is calculated as follows:
Net Income [ 2.575 B ]
(/) Average Equity over Period [ 13.509 B ]
(=) Return on Common Equity [ 19.1% ]
The tables below summarizes the trend in GSK’s return on common equity over the last five years:
| Fiscal Year |
Net Income |
Average Common Equity |
Return on Common Equity |
| 2020-12-31 |
4.873 B |
12.996 B |
37.5% |
| 2021-12-31 |
3.316 B |
14.821 B |
22.4% |
| 2022-12-31 |
4.461 B |
12.827 B |
34.8% |
| 2023-12-31 |
4.928 B |
11.973 B |
41.2% |
| 2024-12-31 |
2.575 B |
13.509 B |
19.1% |
Return on equity represents the percentage return a company generates on the money shareholders have invested.
The Net Income used in
the numerator is often adjusted for one-time and non-recurring items to present a clearer view of future earnings. Since income is earned over the course of a year, we average book value of Common Equity at the start and end of the year for the denominator.
In general, a higher return on equity suggests management is utilizing the capital invested by shareholders efficiently.
Click the link below to download a spreadsheet with an example Return on Assets calculation for GSK plc below: