Read the formula and its variables
The net income scope and equity scope must be compatible.
| Input | Meaning |
|---|---|
| NI | Period income for the chosen scope |
| Average E | Corresponding positive average equity |
Inspect a stated example
Income 189 and average equity 700 give 27%.
The illustrative inputs are not an actual issuer’s data. Match balance coverage, flow period and units before applying the formula.
Keep the conclusion within the evidence
Negative or zero equity changes the ordinary interpretation. A high ratio alone is not a forecast of future returns.
A ratio change can motivate a further question. It does not automatically identify the transaction, risk or operational outcome that produced it.