ROE (Return on Equity)

ROE (Return on Equity) measures how efficiently a company uses shareholders' money to generate profits. It's calculated by dividing net income (what the company earned after expenses) by shareholders' equity (the owners' stake in the company). You'll see ROE listed on most financial websites when researching stocks, and it matters because a higher ROE generally means management is doing a better job turning your investment into earnings. For example, if Company A has an ROE of 15% while Company B has 8%, Company A is generating more profit per dollar of shareholder money—though you'd want to compare companies in the same industry for a fair comparison. Think of it as a report card for how hard your money is working.