Return on Equity


Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. Because shareholders’ equity is equal to a company’s assets minus its debt, ROE is considered the return on net assets. [1] ROE is considered a measure of the profitability of a corporation in relation to stockholders’ equity. Measure profitability by examining your ability to generate revenue for each unit of shareholder equity. [2] [3] [4] [5] [6]


[3] Maxwell, A. L., Jeffrey, S. A., & Lévesque, M. (2011). Business angel early stage decision making. Journal of Business Venturing, 26(2), 212–225.

[4] Chandler, G.N., and Hanks, S.H. 2002. Measuring the performance of emerging businesses: A validation study. Journal of Business Venturing.

[5] Richard, P.J., Devinney, T.M., Yip, G.S., and Johnson, G. 2009. Measuring Organizational Performance: Towards Methodological Best Practice. Journal of Management.

[6] Wikipedia. Retrieved May 21, 2021, from

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