What is Return on Equity?
Profit generated per unit of shareholder equity.
How to calculate it
Calculate Return on Equity as: Net income / Shareholder equity × 100. Pull the inputs from your connected data and track the trend over time in your dashboard.
Examples
Example 1
$100k net income / $500k equity = 20% return on equity.
Example 2
$120k net income on $600k of shareholder equity -> 20% ROE, strong, though part of the gain comes from a recent debt-funded expansion.
Why it matters
Return on equity (ROE) measures the profit generated per unit of shareholder equity and shows how efficiently equity capital is being put to work. It is a key metric for investors assessing management's ability to generate returns. High leverage can inflate ROE artificially, so it should be read alongside the debt-to-equity ratio.
Benchmark context
15-20% is often considered strong, but it varies by industry and capital structure; compare to sector peers and watch for leverage-driven inflation.
Common pitfalls
High leverage can inflate ROE artificially.
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