Return on Equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. Essentially, ROE indicates how effectively management is using a company’s assets to create profits. A higher ROE suggests that the company is more efficient at generating profits from every unit of shareholders’ equity. ROE is especially useful for comparing the profitability of companies in the same industry.
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Jenna Lofton, MBA is a stock trading and investment expert with over a decade of experience in the financial industry. She began her career as a financial advisor on Wall Street and now helps everyday investors make smarter financial decisions through StockHitter.com.
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