Return of Equity

This is a measure of the return that owners of the business make on their investment. In an owner owned business, it represents the rate at which profit is being generated for every currency unit invested (including retained capital). However, as with the Debt to Equity Ratio above, it really comes into its own in businesses that have outside shareholders. It represents the return they can expect their investment to generate for the business which, they hope, will be transferred to them by way of dividends or capital gains on the value of their shareholdings.

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