Return on equity (ROE)

Also called: return on equity

Profit made for every 1 of shareholders' money in the business.

Formula

ROE = Net income ÷ Shareholders' equity

Worked example

1. Net income = $1.5bn
2. Shareholders' equity = $8.0bn
3. $1.5bn ÷ $8.0bn

Result: 18.8%

How to read it

Higher is better, but debt can inflate ROE because it shrinks equity. Check it alongside ROIC and debt/equity.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)