What is return on equity?

You wouldn't want a car with lousy mileage. So why should your stock investments be any different? Return on equity (RoE) is essentially the mileage of a business. It is a percentage figure that helps you gauge how efficiently a company is capable of using your investments to generate profits - the higher the return on equity, the more efficient the company's management. How is it calculated You need to know two figures to calculate RoE - net income and shareholder's equity. Net income is the total amount of money a business has earned in a given period after subtracting expenses, such as expenses it has incurred to run the business, interest payments on the loans it might have taken, taxes, amortisation, and depreciation. This figure is present at the end of a company's profit and

This article was originally published on January 10, 2023.