Plain-English definitions, reviewed by an independent investor
ROE (Return on Equity)
ROE measures profit generated for each dollar of shareholders’ equity.
ROE measures profit generated for each dollar of shareholders’ equity.
ROE = Net Income ÷ Shareholders’ Equity × 100%
Why it matters
It is a favourite gauge of how well a company rewards its owners.
Common confusion
Very high ROE can be a warning if propped up by debt rather than real efficiency; check leverage.
Frequently Asked Questions
What is a good ROE?
Many investors like 15%+, but pair it with low debt and steady earnings.
ROE vs ROA?
ROE uses equity only; ROA uses all assets. A gap between them signals debt use.