Question
As an example, Wells Fargo produced net income of just over $23 billion in 2015, and had total assets of $1.787 trillion at the end
As an example, Wells Fargo produced net income of just over $23 billion in 2015, and had total assets of $1.787 trillion at the end of the year. Dividing these two numbers and multiplying by 100 shows a ROA of 1.29%.
If you want the most accurate calculation possible for ROA (or ROE), you need to take an average of the assets or equity over the time period you're considering.
In the case of a bank's annual ROE, the best practice is to take the average of the assets at the end of the last five quarters.
For Wells Fargo, the five-quarter average assets were $1.737 trillion, which produces a slightly higher ROA of 1.32%
For return on equity, you'll need
1.the net income
the total shareholders' equity
All these can be found on the balance sheet.
The formula for ROE is
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