understanding financial jargon
Return On Equity (ROE)
This is a common variant of Return on Capital Employed (ROCE) and shows the net return a company makes on the money shareholders invest into it's business. The ROE is calculated by taking the operating profit after interest charges, as a percentage of shareholders funds. So if a firm generates operating profits of £80 million, has interest charges of £10 million and a shareholders fund of £210 million, then
ROE = (80 - 10)/210 * 100% or 33%
This is the return made for the shareholders only, and the higher this number the better. ROE can be used to compare the returns available from different companies.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
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