Return on Equity (ROE)

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE is considered the return on net assets. ROE is considered to be a gauge of a corporation's profitability and how efficient it is in generating profits.

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Formula

Return on Equity = Net Income ​​/ Average Shareholders’ Equity


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