Return on equity (ROE)

The amount of net income returned as a percentage of shareholder equity. Return on equity measures a company’s profitability by revealing how much profit a company generates with the money shareholders have invested. More simply, it shows how well a company uses investment funds to generate earnings growth; how efficiently it uses its assets to produce earnings. ROE is expressed as a percentage. It may be more meaningful to look at ROE over a period of five years rather than one year. ROE = Net Income / Shareholder Equity Reverse stock split – A reduction in the number of a company’s shares outstanding that increases the par value of its stock or earnings per share (EPS).