Core Metrics
IntermediateWhat is ROE?
ROE is net profit divided by average shareholders' equity. It measures how efficiently a company uses shareholder capital.
Quick Definition
ROE (Return on Equity) = Net Income ÷ Shareholders' Equity. It measures how efficiently management generates profit from capital. Above 15% is generally considered strong.
Use this concept with tools
Inflation-adjusted Return
Nominal return vs purchasing-power return.
CAGR
Calculate Compound Annual Growth Rate (CAGR) from start and end values. Convert between annualized returns and final investment amounts. Free CAGR calculator.
Compound Interest
Calculate compound interest growth with recurring contributions. See year-by-year balance breakdowns, total gains, and the power of compounding over time. Free online calculator.
Investor quotes to remember
“If you don't keep learning, others will surpass you.”
“The most dangerous words in investing are 'this time is different'.”
“I only bet when the odds are clearly in my favor.”
“Knowing what you don't know is more important than knowing what you do.”
Related concepts
What is the P/E ratio?
P/E ratio = Share Price ÷ Earnings Per Share. It shows how much investors pay for each dollar of profit. A high P/E implies high growth expectations.
What is free cash flow?
Free Cash Flow (FCF) = Operating Cash Flow − Capital Expenditures. It is the actual cash a business generates after maintaining its assets. Warren Buffett considers FCF the true measure of a company's earning power.
What is the difference between gross margin and net margin?
Gross margin = (Revenue − COGS) ÷ Revenue. Net margin = Net Income ÷ Revenue. Gross margin shows production efficiency; net margin shows overall profitability after all expenses and taxes.