RETURN ON EQUITY Definition

Bookmark and Share

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

Learn new Accounting Terms

PROJECTION is an approximation of future events. Usually a projection is made by extrapolating known information into the future period, considering events that could affect the outcome. See FORECAST, BUDGET.

CUSTODIAN BANK is the bank that acts a custodian to a mutual fund. Does not manage anything, just holds the cash and securities and does the clerical.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.