Shareholders' Equity = Assets - Liabilities For example, if a company's total book value of assets amount to $1,000,000 and total liabilities are $300,000 the shareholders' equity would be $700,000.

Generally, companies with durable competitive advantages tend to have above-average returns on shareholders' equity. Some examples, from years prior to 2008: Coca-Cola: 30%. Hershey's (HSY): 33%.

Return on equity (ROE) measures how well a company generates profits for its owners. It is defined as the business’ net income relative to the value of its shareholders' equity. It reveals the ...