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Financial statements
Also called: ROE, Return on equity
ROE (return on equity) is a company's net profit divided by its shareholders' equity, as a percentage. It shows how much profit the owners' money in the business earned in a year.
ROE = Net profit ÷ Shareholders' equity × 100
A company made a net profit of ₹120 crore and its shareholders' equity is ₹800 crore. Its ROE is 15%.
Borrowing raises ROE without the business getting any better, so read ROE next to debt to equity and ROCE.
It is the single best measure of whether a company is good at turning the shareholders' money into more money.
Consistently above fifteen is a strong business. But borrowing heavily flatters this number, so it should be read next to debt.
| Below 8% | Earning less than a person could reasonably expect elsewhere. |
|---|---|
| 8% to 15% | Adequate, not remarkable. |
| 15% to 25% | Strong. The business compounds the owners' money well. |
| Above 25% | Exceptional — check whether debt or a one-off explains it. |
Rough conventions for an ordinary company; sectors differ. A range is not a buy or sell level.
ROE (return on equity) is a company's net profit divided by its shareholders' equity, as a percentage. It shows how much profit the owners' money in the business earned in a year.
ROE = Net profit ÷ Shareholders' equity × 100. A company made a net profit of ₹120 crore and its shareholders' equity is ₹800 crore. Its ROE is 15%.
No. ROE describes one aspect of a company, a price or a contract, and it is best read alongside other numbers and the business itself. Jivani Markets is a research and education platform; it does not give buy, sell or hold recommendations.