Return on Equity (ROE)

Definition

Net income divided by equity, showing how effectively you're using shareholder money to generate profits. It's management's report card.

Example Usage

Our ROE improved to 15% this year, which pleases shareholders who could invest elsewhere.

Origin

Modern financial analysis metric popularized during the mid-20th century.

Fun Fact

Warren Buffett obsesses over ROE because it reveals whether management actually knows what it's doing.

Source: Investment analysis

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