Return on Tangible Equity (ROTE)
ROE adjusted for goodwill — a more conservative profitability measure.
Definition
ROTE removes goodwill from the equity base, providing a clearer picture of returns on tangible capital. Companies with large acquisition-driven goodwill may show inflated ROE; ROTE corrects for this.
Formula
Interpretation
| Range | Assessment |
|---|---|
| > 15% | Strong tangible returns |
| 10% – 15% | Adequate |
| < 10% | Weak — or heavy goodwill load |
ROTE > ROE when goodwill is significant, indicating that tangible capital is being used efficiently but the company carries intangible acquisition premium.
Industry Routing
Available for all industries (Industrial, Banking, Insurance).
In Finsco
Computed by the audit returns command alongside ROE.