What is Return on Equity (ROE) in the stock market and how it is Calculated?


Return on Equity (ROE) calculation formula :

Significance of Return on Equity (ROE) :

  1. Return on equity is an essential way to measure how profitable a company has been.
  2. ROE is considered a measure of a company’s profitability and how efficient it is in generating profits.
  3. The higher the percentage, the more efficiently the equity base has been utilized, indicating better returns to investors.
  4. With this, you can analyze the financial growth of the company and also know whether the company is making a profit year on year or not.
  5. ROE is only used to determine the financial performance of companies in the same sector, it cannot be used for companies in different sectors.

Can a company’s ROE be negative Value?