Return on equity

The return on equity (ROE) is a measure of the profitability of a business in relation to its equity;^[1] where:

ROE = .mw-parser-output .sfrac{white-space:nowrap}.mw-parser-output .sfrac.tion,.mw-parser-output .sfrac .tion{display:inline-block;vertical-align:-0.5em;font-size:85%;text-align:center}.mw-parser-output .sfrac .num{display:block;line-height:1em;margin:0.0em 0.1em;border-bottom:1px solid}.mw-parser-output .sfrac .den{display:block;line-height:1em;margin:0.1em 0.1em}.mw-parser-output .sr-only{border:0;clip:rect(0,0,0,0);clip-path:polygon(0px 0px,0px 0px,0px 0px);height:1px;margin:-1px;overflow:hidden;padding:0;position:absolute;width:1px}⁠Net Income/Average Shareholders' Equity⁠

^[1]

Thus, ROE is equal to a fiscal year's net income (after preferred stock dividends, before common stock dividends), divided by total equity (excluding preferred shares), expressed as a percentage. Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities, ROE can also be thought of as a return on NAV, or assets less liabilities.

^ ^a ^b Jason Fernando (2023). "Return on Equity (ROE) Calculation and What It Means", Investopedia

[Fernando-1] Jason Fernando (2023). "Return on Equity (ROE) Calculation and What It Means", Investopedia

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