Return on Equity (ROE)

Return on Equity (ROE) measures how effectively a company uses shareholders' invested money to generate profits. It is calculated by dividing net income by shareholders' equity. A higher ROE indicates that the company is efficiently turning shareholders’ investments into earnings, reflecting strong management performance. For example, if a company has an ROE of 15%, it means that for every dollar shareholders invested, the company earns $0.15 in profit. ROE helps investors assess how well a company utilizes their capital to generate returns, guiding investment decisions and indicating overall financial health.