Return on Equity (ROE)
Return on Equity (ROE) is a metric utilized to assess a company’s profitability relative to its stockholder equity. By dividing the net income by the total equity, ROE calculates the return on investment for each dollar of equity. Sometimes referred to as the return on net assets, ROE subtracts all debt and focuses on net income rather than gross income. The primary objective of calculating ROE is to evaluate the level of profit generated from equity investments, offering institutional investors valuable insights into a company’s performance and financial efficiency.