ROE - Return on Equity (%)
ROE = Profit/Equity
ROE abbreviates 'Return on Equity'.
ROE shows how well the company creates profit in relation to its Equity.
As a shareholder, you have paid for the company's equity and you want to get a good return. A high ROE shows that the company creates a good return on equity.
ROE can be misleading as it uses Equity which can contain large debts. If the company has large debts, ROE can become too high. A good alternative is to use the key figure ROA.
Things to keep in mind
- A high value is good.
- Equity can contain a lot of debt, which results in a misleading ROE.