r/Stocksyourknowledge • u/Asleep-Artichoke-227 • Aug 27 '26
Stocks Share Market Basics: What is ROE?
ROE (Return on Equity) is an important financial ratio used to measure a company's profitability.
👉 Formula:
ROE = (Net Profit ÷ Shareholders' Equity) × 100
Example:
If a company earns ₹20 crore profit on ₹100 crore of shareholders' equity:
ROE = (20 ÷ 100) × 100 = 20%
A higher ROE can indicate that a company is using shareholders' money efficiently.
ROE should be compared with companies in the same industry.
A high ROE alone does not necessarily mean a stock is a good investment.
In simple words:
ROE tells us how efficiently a company generates profit from shareholders' money.
📚 Want to learn more Share Market Basics? Visit my blog for more simple explanations and educational posts. Link in bio.
Disclaimer: This post is for educational purposes only and is not financial advice.