5 Most Important Financial Ratios to Analyze a Company

2. Return on Equity (ROE)

Number of Mentions: 4

The return on equity ratio is one of the most important financial ratios to analyze a company. The ratio helps companies assess how efficiently they are able to convert their financing into profits. The return on equity ratio (ROE) is calculated by dividing a company’s net income by its shareholder equity for a certain fiscal period. The ratio is a comprehensive measure to assess how profitable the company is against the capital invested by the shareholder. A low ROE may suggest that a company is underperforming, has low sales, or has high costs.