Return on Equity (ROE)

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Definition of 'Return on Equity (ROE)'

The Return on Equity, or ROE, is the rate of investment return a company earns on shareholders' equity. As an indicator of profitability, ROE is determined by dividing net income from the past 12 months by shareholders' equity. This statistic shows how effectively a company is using its investors' money and includes the company's liabilities in its calculation.

Compare this to Return on Assets (ROA).

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