Return on Equity (ROE)
Net income divided by shareholders' equity.
What is Return on Equity (ROE)?
How efficiently a company converts shareholder capital into profit. Leverage inflates it, so a high ROE built on heavy debt is not the same quality signal as one built on margins.
Return on Equity (ROE): a worked example
$100M income on $500M equity is 20% ROE.
More terms in Valuation & Analysis
Market Capitalization
Share price times shares outstanding - the equity value of a company.
Earnings Per Share (EPS)
Net income attributable to each share of common stock.
Price-to-Earnings (P/E) Ratio
Price per share divided by earnings per share.
Dividend Yield
Annual dividends per share divided by share price.
Payout Ratio
The share of earnings paid out as dividends.
Book Value
Assets minus liabilities - the accounting value of equity.
Free Cash Flow
Operating cash flow minus capital expenditures.
EBITDA
Earnings before interest, taxes, depreciation, and amortization.