Return on Equity (ROE)
Return on Equity (ROE) is a measure that tells us how much additional earnings company has generated with the money shareholders have invested.
It is one of the most important financial ratios because it measures company’s efficiency at generating revenue.
ROE is expressed as percentage and is calculated:
ROE = Net income \ Average shareholders equity
ROE is very useful for comparing companies in the same industries and ussualy, the higher ROE, the better, but the ROE as a financial ratio is irrelevant if company does not reinvest its earning.
| Related Terms: Real Estate Operating Company - REOC |
 |