return on equity a ratio investment brokers use at timesreturn on equity is key for smart stock investing CLICK HERE ROE is rate at which an owner of a company (stockholder) gets a return on the ownership interest or stockholders equity. As you can imagine this is thought of and is, one of the most important financial ratios a company has. A company proves it's worthiness to you the investor if this number is high-or at least is a good start as to whether it is a good company. This shows you how well a company can generate profit from stockholders equity and investment money to generate earnings per share growth. Remembers earnings per share are just simply net income divided by the number of shares. Do you think you would care how much the stockholders get in return of ownership interest? I believe that you should, think that ROE is very important to your investing ventures and the future. ROE should be close to return on invested capital as this shows the company doesn't finance itself through debt i.e. the two numbers should be close to the same. Return on capital is a very important financial ratio which allows you too see how well a company can generate cash flow based on the capital it has invested in the company or shareholders equity. It is calculated by taking net operating profit minus less adjusted taxes divided by invested capital. Make sure that you check this number on yahoofinance or msnmoney. However many times return on equity can change depending on management and other things. Make sure again that you check the management of the company to make sure that it is reasonable to even invest in. ROE can change if things in the company are not as expected--you need to be buying value. AUTHORS OPINION Yes return on equity and capital are very important. |