Financials
Return on equity
A profitability ratio comparing net income with shareholders equity.
What it means
ROE can be affected by profitability, leverage, buybacks, losses, and accounting equity. It is useful only when read with capital structure and balance sheet context.
Example
A company with high debt and low equity can show high ROE even if business risk is elevated.
What not to infer
High ROE does not always mean high quality because leverage can amplify the ratio.