return on equity (ROE)

return on equity (ROE) definition - business

return on equity (ROE)

A measure of the net income that a firm is able to earn as a percent of stockholders' investment. Many analysts consider ROE the single most important financial ratio applying to stockholders, and the best measure of performance by a firm's management. Return on equity is calculated by dividing net income after taxes by owners' equity. Compare profitability ratio. See also return on common stock equity.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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