This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Ratio: Net Income as a percentage of the Shareholders’ Equity.
Example: The Round Number CompanyNet Income = 30; Shareholder Equity = 140 Return on Equity = 30/140 = 21% |
ROE measures how effectively the Shareholders’ investment has been put to work to create profit.
Also known as Return on Investment.
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Calculator for Return On Equity (ROE) Return On Assets (ROA) = Profit / Equity
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The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.