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Return on Equity

Definition

ROE. A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. It is used as a general indication of the company's efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. investors usually look for companies with returns on equity that are high and growing.

Featured Tip

Advice on ROEROE (Return on Equity) equals the company's net income divided by shareholders' equity and is viewed as an indicator of how well a company utilizes shareholders' money. ... Read more