Business and Personal Finance Dictionary

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• RETURN ON EQUITY (ROE)
  
  An amount, expressed as a percentage, earned on a company's common stock investment for a given period. It is calculated by dividing common stock equity (NET WORTH) at the beginning of the accounting period into net income for the period after preferred stock dividends but before common stock dividends. Return on equity tells common stock holders how effectively their money is being employed. Comparing percentages for current and prior periods reveals trends and comparison with industry composites reveals how well the company is holding its own against its competitors.
  
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