Metric
Return on Equity (ROE)
Profit generated per dollar of shareholder capital.
Formula
Net Income ÷ Shareholders' Equity
Definition
ROE measures how much profit the company earns for every dollar of equity. It's widely reported and easy to compare across companies.
Why it matters
Persistent high ROE often reflects a strong business model. But ROE can be inflated by leverage, so always check alongside debt levels and ROIC.
Building blocks
- Net Income
- Final profit left after all costs, interest, and taxes.
- Shareholders' Equity
- Book value owned by shareholders after subtracting liabilities.
Educational information only, not investment advice. Turtleway helps you understand what a metric or concept means; it does not tell you what to buy or sell.