Finance & Interest
Intermediate

Return on Equity

Profit generated per dollar of equity.

Formula

ROE=Net IncomeEquity×100ROE = \frac{\text{Net Income}}{\text{Equity}}\times 100

Variables

Net IncomeProfit
EquityShareholder equity

Example

Measures profitability

Did You Know?

Return on equity is Warren Buffett's favourite single gauge of how well a company uses shareholder money.

profitability