Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity).
Nearby TermsReturn on assets (ROA) Return on capital employed (ROCE) Return on equity (ROE) Return on investment (ROI) Return on sales
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University