Provide a definition for return on equity (ROE).

Return on Equity

A financial ratio that measures the ability of a firm to generate profits from its shareholders' equity.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Shareholders' Equity

The residual interest in the assets of a company after deducting its liabilities; also referred to as stockholders' equity.

Scrutinize the outcomes of financial actions on a company's risk and return configuration.

Verified Answer

Final Answer :

Net income after interest and taxes divided by average common shareholders' equity.

Learning Objectives

Scrutinize the outcomes of financial actions on a company's risk and return configuration.