1. Finance
  2. Shareholder & Creditor Relations

Return on Equity


Measures how much profit a company generates relative to shareholders' equity. Return on Equity (ROE) indicates how effectively the company is using shareholders' funds to produce profits. A higher ROE suggests more efficient use of equity capital.


(Net Income / Average Shaholder's Equity) x 100


If the company's net income is $200,000 and the average shareholder equity is $1,000,000, the ROE would be 20%.