Return on Equity

Return on Equity (ROE) is a financial ratio that measures the return generated on stockholders’/shareholders’ equity. It is more than a measure of profit; it’s a measure of efficiency. ROE measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. It is useful for comparing the profitability of a company to that of other firms in the same industry. ROE can be decomposed to understand the fundamental drivers of value creation in a company.