Return on Equity

What is Return on Equity (ROE)?

Return on equity (ROE) is an ROI metric that shows how a business’s net income compares to its shareholder equity. Here’s how you can calculate this metric:

Return on equity = (net income/average shareholder’s equity) x 100

When this percentage increases over time, it means a company is getting a good return on its shareholders’ funds. On the other hand, a declining ROE may indicate that a business is making poor investment decisions. By calculating your company’s ROE and tracking it over time, you’ll have a better understanding of its financial future.

Related terms

30-Day and 13-Week Operating Cash Burn

30-day and 13-week operating cash burn are also known as the “burn rate.” These are the rates at which a business consumes its cash reserves when it isn’t bringing in profit.

Accounts Payable Days

Accounts Payable Days (AP Days), also referred to as Days Payable Outstanding (DPO), is a financial ratio that measures the average time a company takes to pay its suppliers or vendors for credit purchases.

Accounts Payable Turnover

Accounts payable turnover explains how many times a business pays its creditors in a set timespan. Companies can use this metric to measure their short-term liquidity.

Accounts Receivable Turnover

The accounts receivable turnover ratio (or debtor turnover ratio) allows businesses to evaluate their debt collection efficiency.

Advanced Reporting

Advanced reporting refers to a sophisticated approach to generating and analyzing reports using advanced tools, techniques, and technologies.

Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR) is a key metric used by subscription-based businesses to track and measure their predictable, recurring revenue streams over a one-year period.