---
title: "Definition of ROE"
url: https://signalscreener.fr/definition/roe/
markdown_url: https://signalscreener.fr/definition/roe.md
description: "ROE measures how much profit a company generates with shareholder money."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "ROE"
  - "Return on Equity"
translations:
  es: https://signalscreener.fr/es/definition/roe.md
  fr: https://signalscreener.fr/fr/definition/roe.md
  pt: https://signalscreener.fr/pt/definition/roe.md
  zh: https://signalscreener.fr/zh/definition/roe.md
---

# Return on Equity

## What is ROE?

ROE measures how much profit a company generates with shareholder money. It shows the percentage return on shareholder equity.

## Think of it like this

You invest $10,000 in a friend's business (your equity). If they generate $1,500 profit yearly, your ROE is 15%. Compare to a bond paying 5% - the business gives 3x better returns!

## Formula

```
ROE = Net Income / Shareholder Equity
```

- **Net Income**: Company's total profit after all expenses
- **Shareholder Equity**: Total assets minus total liabilities

## Why it matters

- Shows how profitable the company is for owners
- Higher ROE = better returns for shareholders
- Compare to interest rates and bonds
- Warren Buffett looks for consistent high ROE

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| < 10% | Poor | Below bond returns |
| 10-15% | Average | Meeting basic expectations |
| 15-20% | Good | Creating solid value |
| > 20% | Excellent | Exceptional returns |

## Real-world example

Coca-Cola ROE: 40% - strong brand power. Banks: 10-12% - heavily regulated. Tech companies: 20-30% - high margins. Utilities: 8-10% - stable but low returns.

---

This is educational content, not financial advice.

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