Glossary
Return on equity: meaning, example and why it matters
Net profit divided by shareholders' equity, as a percentage. It shows how much profit a company earns on the money shareholders have in it, and it can be raised by borrowing.
Worked example
A company with a profit of ₹200 crore and shareholders' equity of ₹1,000 crore has a return on equity of 20%.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
ROE shows how much profit a company makes on the money shareholders have in it, which helps compare companies in the same line of business.
Related terms
See it in practice
Frequently asked questions
Is a high ROE always good?
Not always. It can be boosted by borrowing, so it is read together with debt.
Is this page investment advice?
No. Return on equity is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
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Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.