ROE

Explanation: Return on Equity (ROE) is a financial ratio that measures the profitability of a company in relation to its shareholders’ equity. It indicates how effectively a company utilizes shareholder funds to generate profits. ROE is calculated by dividing the company’s net income by its average shareholders’ equity and is expressed as a percentage. A higher ROE indicates better profitability and efficiency in generating returns for shareholders.

Example: TCS has an ROE of 47.26% in FY23, which means that for every rupee of shareholders’ equity invested in the company, it generates a profit of approximately 47.26 paise. This high ROE reflects TCS’s ability to generate significant returns for its shareholders relative to the equity invested in the business. It indicates strong profitability and efficient use of shareholder funds to drive earnings growth. Investors often use ROE to assess a company’s profitability and compare its performance with peers and industry benchmarks. A consistently high ROE may suggest a company’s ability to create value for its shareholders over time.

You can view the ROE for any company on Radar under Profitability Ratios in the Ratios section.