Return on Equity (ROE)
Net income divided by shareholders' equity — measures how efficiently a company uses equity capital.
What Is Return on Equity (ROE)?
ROE measures how much profit a company generates with the money shareholders have invested. A company with 20% ROE earns $20 for every $100 of shareholder equity. Warren Buffett famously targets companies with consistently high ROE.
Formula
ROE = Net Income / Shareholders' EquityWhy It Matters
High ROE indicates efficient management and strong competitive advantages. However, very high ROE driven by excessive debt can be misleading — always check debt-to-equity alongside ROE.
Typical Ranges: Above 15% is generally strong. Above 20% is excellent. Negative ROE means the company is losing money.
Real Examples from Our Database
Based on the latest data in our system. Values may change.
Related Terms
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