What Is Return On Equity (ROE)?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Return on Equity, or ROE, is an indicator of the profitability of a firm relative to the shareholders equity of the firm. The calculation for ROE is:

  • Net Income / Shareholders Equity

Return on Equity is used to assess how efficiently the investment by shareholders is being used to produce profits, and it can be compared between similar companies to give an idea of the relative performance and efficiency of a firm. The higher the return on equity, the more efficiently it is using its money.

Related Terms

Return to Finance Dictionary

Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.