Friday, September 13, 2013

Return On Equity (ROE)

Return on equity is the amount of net income returned as a percentage of shareholders equity. This indicator measures a corporation's profitability.

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income/Shareholder's Equity

Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder's equity does not include preferred shares.

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