ROE (Return On Equity)
A small try on a vital aspect of finance not only for the shareholders but also for the students as well i.e. Return on Equity (ROE) which is a measure of a
corporation's profitability that reveals how much profit a company generates
with the money shareholders have invested.
ROE is calculated as:
The ROE is useful for comparing the
profitability of a company to that of other firms in the same industry.
Investors wishing to see the return on common equity may modify the formula
above by subtracting preferred dividends from net income and subtracting
preferred equity from shareholders' equity, giving the following:
