Ten Stock Analysis Ratios Used By The Pros: Return on Equity

Fifth Key Ratio :

Return on Equity

This is a key measure of efficiency. In crude terms, it is a measure of how well the board of a company is putting your money to work. A higher ROE indicates that the business is generating a higher proportion of profit for the resources they have at their disposal. It is extremely useful when comparing companies in the same industry, but not so much inter-sector due to the difference in capital requirements.


Net Income

Shareholder Equity

Return on Equity = Net Income/Shareholder Equity

EPS = Net Income/Number of Share Outstanding

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