Return on Equity (ROE)
Profitability relative to shareholder investment.
Formula
ROE = Net Profit After Tax / Shareholders' Equity × 100
Real World
Apple consistently reports an ROE above 150% because it buys back vast amounts of its own shares, reducing equity — investors cite this when justifying Apple's premium valuation.
Exam Focus
When evaluating ROE, flag that share buybacks artificially inflate it; examiners reward awareness of limitations.
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