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Asked by Franziska Last Modified
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Khalid
Professional Stocks and Forex trader with 4 years of experience.
A stock's Return on Equity (ROE) is a financial metric indicating the profitability of a company in relation to its shareholders' equity. It is calculated by dividing the net income by the average shareholders' equity. The formula for ROE is:
\[ ROE = \frac{\text{Net Income}}{\text{Average Shareholders' Equity}} \]
ROE provides insights into how efficiently a company utilizes equity capital to generate profits, and a higher ROE is generally considered favorable.
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