Return On Equity (ROE)

Formal

A simple percentage comparison between the profits generated by a business and the equity (or risk capital and shares) that the company needed to generate that profit. Eg I have £1 Million shares in a business and make £100,000 profits per annum = 10% Return On Equity.

Real-world Example

A company earns $500k in net profit on $2.5M of shareholders' equity - an ROE of 20%, showing the return shareholders are getting specifically on the capital they've invested.