ROE Explained: What It Is & Why It Matters

ROE stands for Return on Equity. It's a financial ratio that measures how much profit a company generates for each dollar of shareholders' equity. It is calculated by dividing the net income of a company by its average shareholders' equity. ROE is used by investors and analysts to evaluate a company's profitability and efficiency in using its shareholders' capital. A high ROE indicates that a company is generating a significant return on the investments made by its shareholders.