Where the return on equity came from

Apple's return on equity went from 35.62 percent in fiscal 2016 to 196.96 percent in fiscal 2022, more than five times over. Net margin in the same two years rose from 21.19 to 25.31 percent, under a fifth. The margin did not produce that return, and the table says which direction to look in without saying how much.

The identity, run backwards

Asset turnover is revenue divided by total assets, and financial leverage is total assets divided by equity. Only the margin term sits in the ten-year table, but the identity can be rearranged: divide return on equity by net margin and what remains is the other two terms combined.

What the table confirms

Debt to equity went from 0.68 to 2.61 over the same years, the funding side moving hard in the direction the residual requires. From fiscal 2020, this product's debt-to-equity figure carries lease obligations inside the debt term under ASC 842; on borrowings alone, fiscal 2025 was 1.34 rather than the 1.52 the table shows.

Two cautions belong next to that ratio. Debt to equity is not the leverage term in the identity: the identity's term is total assets over equity, and payables, accrued liabilities and deferred revenue fund assets too, without interest. And a rising ratio with equity falling is not the same story as one with debt rising. Both are visible in the filing, the debt note for borrowings and the statement of shareholders' equity for repurchases. Confirming which one happened is not the same as inferring it from the ratio.

Across the nine year-on-year changes in the table, debt to equity and return on equity moved in the same direction in all nine; net margin matched the direction of return on equity in only two, with fiscal 2023 flat at two decimals. That is co-movement, not cause, and it is consistent with a third factor moving both. It is useful anyway, because if the margin had driven the return, the margin is the row that would show nine matching turns. It does not.

Why a buyback does this without any borrowing

A repurchase removes cash from assets and the same amount from equity. Equity is much smaller than total assets, so it falls by a larger proportion, and return on equity rises with operations unchanged. The transaction is itemised in the statement of shareholders' equity, the fourth statement and the one readers skip.

Two definitional choices move the answer further: return on equity on closing equity differs from average equity for a company repurchasing through the year, and what counts as equity varies when minority interests or preferred stock are present. The table above uses closing equity throughout; the important property is using one convention consistently, not which one.

What none of this settles

Whether the repurchases were a good use of the money is not answered here. Return on equity rises when equity shrinks whether the cash was well spent or not. Whether a buyback created value depends on the price paid against what the shares were worth, and a ratio series cannot answer that. For banks, leverage is structural rather than chosen, and a high return on equity there carries none of this information.

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