ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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RETURN ON EQUITY Definition
RETURN ON EQUITY (ROE) measures the overall efficiency of the firm in managing its total investments in assets and in generating a return to stockholders. It is the primary measure of how well management is running the company. ROE allows you to quickly gauge whether a company is a value creator or a cash consumer. By relating the earnings generated to the shareholders equity, you can see how much cash is created from the existing assets. Clearly, all things being equal, the higher a companys ROE, the better the company. Formula: Net Income / Stockholders Equity
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PROFITABILITY RATIOS are measures of performance showing how much the firm is earning compared to its sales, assets or equity.
FUNDS TRANSFER is money that is withdrawn from one account and transferred into a different account. See also ELECTRONIC FUNDS TRANSFER.