Sales and profit

ROE (Return on Equity)

Net income divided by shareholders' equity: how much profit a company makes for each dollar that belongs to its owners.

Why does it matter?

It is one of the most used measures of profitability, especially for banks.

How do I read it?

ROE rises when a company borrows more or buys back many shares, because equity shrinks, so it helps to look at debt too. When equity is negative, ROE has no meaning. ROIC, in StockLab's Advanced View, also counts debt.

Example

$20 million of net income and $100 million of shareholders' equity give an ROE of 20%. If equity were only $50 million, the same profit would give an ROE of 40%.