Return on Equity (ROE) is a measure of financial performance that is calculated by dividing net income by average shareholder's equity.ROE is considered a measure of how effective management is at using equity financing to fund operations and grow the company.A higher ROE indicates that a company is earning more income per dollar of shareholder's equity.A lower ROE could suggest the opposite - that management is not effectively using a company’s assets to create profits.
Learn Return on Equity with interactive examples and practice exercises in our Performance Metrics module.
This interactive learning module helps you understand Return on Equity through hands-on practice and real-world examples.