What Is Return on Equity (ROE)?
What is ROE?
ROE answers how productively management uses shareholder capital. Formula: Net Income ÷ Shareholder Equity.
What's a good ROE?
Below 10% is weak. 10–15% is average. 15–25% is strong. Above 25% is excellent — but check for leverage distortions.
Why can ROE be misleading?
Debt-funded buybacks shrink equity and inflate ROE. Always cross-check with debt-to-equity.
Frequently asked questions
ROE vs ROA?
ROA divides profit by total assets and is harder to game with leverage.
Can ROE be negative?
Yes, if a company has a net loss.
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