Return on equity ( ROE ) is a measure of the profitability of a business in relation to its equity. Learn how to calculate ROE , its usage, and its components with the DuPont formula. Return on Equity or ROE is one of the vital parameters for collecting information about a company. What Is Return on Equity ( ROE )? Definition The return on equity ratio ( ROE ratio) is calculated by expressing net profit attributable to ordinary shareholders as a percentage of the company's equity. The equity of a company consists of paid-up ordinary share capital, reserves, and unappropriated profit. This represents the total interest of ordinary shareholders in the company. The ROE ratio shows how a firm's management has been able to utilize the resources at its disposal. It is used to ... The difference between return on equity ( ROE ) and return on capital employed (ROCE) is that ROE measures net income divided by shareholders’ equity and ROCE measures EBIT (earnings before interest and taxes) divided by total assets minus current liabilities.
