Return on equity

How it is used

One of the most quoted ratios in bank results, shortened to ROE. Banks set ROE targets and compare them with their cost of equity; analysts read it together with return on assets (ROA). In high-inflation economies, ROE should be compared with inflation to judge real profitability.

Example sentences

1. The bank's return on equity reached 25% in the first quarter.

2. Our strategic plan targets a sustainable return on equity above our cost of capital.

Common collocations

• return on equity
• ROE target
• return on assets
• average equity

Related terms

• equityThe owners' share of a company: what is left when liabilities are taken away from assets. It includes paid-in capital and retained profits.
• net incomeWhat is left of a company's revenue after all costs, interest, taxes and other expenses are deducted. When it is negative, it is called a net loss.
• profitMoney a business earns after subtracting its costs from its revenue. When costs are higher than revenue, the result is a loss.
• shareholderA person or organisation that owns shares in a company and so owns part of it, with rights such as voting and receiving dividends.
• net interest marginA bank's interest income minus its interest expense, divided by its average interest-earning assets. It shows how profitably the bank lends and invests.

This word in other fields

The same English word can have a different meaning in another field:

• return on equity · Investing & the Stock Market

More terms: Financial Statements

• balance sheet
• income statement
• asset
• liability
• revenue
• write off
• depreciation
• EBITDA
• in the red
• expense
• annual report
• audit