Return On Equity

Return on Equity - Return on Equity is a measurement used to rate the return on the ownership interest on common stock generally held by individuals, not by a corporation. A tool used to measure a firm's efficiency of generating profits from every dollar invested of net assets. Some industries have a high return on equity because they do not have a need for assets. Other companies are high capital investment companies which limits their competition. When general corporate earnings are not reinvested the return on equity becomes irrelevant. The growth rate will be lower if the earnings used are to buy back shares