What is the meaning of Return on Equity (ROE)?

Return on Equity (ROE) is an amount, expressed as a percentage, earned on a company's common stock investment for a given period. It is calculated by dividing common stock equity (NET WORTH) at the beginning of the accounting period into net income for the period after preferred stock dividends but before common stock dividends. Return on equity tells common stock holders how effectively their money is being employed. Comparing percentages for current and prior periods reveals trends and comparison with industry composites reveals how well the company is holding its own against its competitors.

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APABarry Goldsmith. (2010). return on equity (roe). Retrieved September 22, 2026, from http://smartdefine.org/return_on_equity_(roe)/definitions/1162476
ChicagoBarry Goldsmith. 2010. "return on equity (roe)" http://smartdefine.org/return_on_equity_(roe)/definitions/1162476 (accessed September 22, 2026).
HarvardBarry Goldsmith 2010, return on equity (roe), Smart Define, viewed 22 September, 2026, <http://smartdefine.org/return_on_equity_(roe)/definitions/1162476>.
MLABarry Goldsmith. "return on equity (roe)" 21 October 2010. Web. 22 September 2026. <http://smartdefine.org/return_on_equity_(roe)/definitions/1162476>