top of page

Return on Shareholders’ Equity Ratio

Return on shareholders' equity (ROE) ratio is a financial metric that measures the profitability of a company relative to the amount of shareholder equity invested in the business. ROE is typically calculated by dividing a company's net income by its shareholder equity, expressed as a percentage. Net income is the total profit earned by the company, while shareholder equity is the amount of capital invested in the business by its shareholders. ROE is a useful metric for evaluating a company's ability to generate profits from the equity invested by its shareholders. It is often used by investors and analysts to compare the performance of different companies in the same industry or sector. A higher ROE generally indicates that a company is using its shareholders' equity more efficiently to generate profits. However, ROE should be considered in the context of other financial metrics and factors such as the company's debt levels, asset quality, and market conditions. A high ROE may be unsustainable if the company is heavily leveraged or if its profits are not being reinvested in the business to support future growth. Overall, ROE is a valuable financial metric for evaluating a company's performance, but it should be used in conjunction with other metrics and factors to gain a more comprehensive understanding of a company's financial health and future prospects.

bottom of page