PSX Clarity
Sign inStart free
R
Glossary · PSX term

Return on equity.

Return on equity, or ROE, shows how much profit a company generates compared with shareholder equity. It is a profitability ratio, not a guarantee of future returns.

Definition

ROE is calculated as profit attributable to shareholders divided by average shareholder equity. Strong ROE can indicate efficient use of capital, but investors should check leverage, one-off gains, and sector norms.

Worked example

If a company earns Rs. 2 billion on Rs. 20 billion of equity, its ROE is 10%.

Related on PSX Clarity

Term
Book value
Term
Price-to-book ratio
Term
Earnings per share

More glossary terms

Browse all 199 terms →
Right shares
Right shares give existing shareholders the option to buy additional shares, usually at a set price and ratio. Investors should review the purpose, price, and dilution effect before deciding whether to subscribe.
Realized gain
A realized gain is profit from a position that has been sold. It matters for performance tracking and may affect tax calculations depending on rules, holding period, and investor status.
Reverse split
A reverse split combines several shares into one, raising the price per share without changing total value.
Record date
The record date is the cut-off day a company uses to decide who qualifies for a dividend or other action.
Rollover week
Rollover week is the period when expiring futures positions are closed or moved to the next contract.
Real Estate Investment Trust (REIT)
A REIT is a listed vehicle that owns or develops real estate and passes income to unit holders.
Return on assets (ROA)
ROA shows how much profit a company generates from its total assets.
Risk-free rate
The risk-free rate is the return on an investment considered to have virtually no default risk.
Risk tolerance
Risk tolerance is how much loss and volatility you can handle financially and emotionally.