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ROE Insights for Investors

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. ROE is considered a gauge of a corporation's profitability and how efficient it is in generating profits from its equity financing. To calculate ROE, divide net income by the value of shareholders' equity.

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35 views1 page

ROE Insights for Investors

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. ROE is considered a gauge of a corporation's profitability and how efficient it is in generating profits from its equity financing. To calculate ROE, divide net income by the value of shareholders' equity.

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Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ROE - return on equity

Return on equity (ROE) is a measure of financial performance calculated by dividing


net income by shareholders' equity. Because shareholders' equity is equal to a
company’s assets minus its debt, ROE is considered the return on net assets.

ROE is considered a gauge of a corporation's profitability and how efficient it is


in generating profits. The higher the ROE, the more efficient a company's
management is at generating income and growth from its equity financing.

KEY TAKEAWAYS
Return on equity (ROE) is the measure of a company's net income divided by its
shareholders' equity.
ROE is a gauge of a corporation's profitability and how efficiently it generates
those profits.
The higher the ROE, the better a company is at converting its equity financing into
profits.
To calculate ROE, divide net income by the value of shareholders' equity.
ROEs will vary based on the industry or sector in which the company operates.

Calculating Return on Equity (ROE)


ROE is expressed as a percentage and can be calculated for any company if net
income and equity are both positive numbers. Net income is calculated before
dividends paid to common shareholders and after dividends to preferred shareholders
and interest to lenders.

Formula

Return on Equity= net income upon Average Shareholders' equiy

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