Fundamentals & valuation
What is ROE (Return on equity)?
Also called: Return on equity
Hinglish mein padhein: ROE kya hota hai?
ROE is net profit divided by shareholders' equity. It shows how much profit the company makes on the money shareholders have invested.
Consistently high ROE (say above 15%) with low debt often points to a strong business with a competitive advantage.
Debt can inflate ROE, so check it alongside debt-to-equity and ROCE.
Related terms
- ROCE (Return on capital employed)ROCE measures operating profit (EBIT) as a percentage of all capital used in the business — equity plus debt.
- Debt-to-equity ratioDebt-to-equity divides a company's borrowings by its shareholders' equity. It shows how much the business relies on debt.
- Book valueBook value is a company's total assets minus total liabilities — shareholders' equity on the balance sheet.