What is Return on Equity (ROE)?

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[GhanYt]

After selling a couple homes in 2022, I'm anticipating a housing crisis in order to buy inexpensively. As a backup plan, I've been thinking about purchasing stocks. What recommendations do you have for the best time to buy? On the one hand, I keep reading and seeing trader earnings of over $500k each week. On the other side, I keep hearing that the market is out of control and experiencing a dead cat bounce. Why does this happen?...

[Discovery_and_Change]

0:52 The Return on Equity (ROE) is a measure of how efficient a company is in producing a profit for shareholders
1:37 The net value of a company (its equity) is what's left over after subtracting liabilities from assets
2:10 ROE is the net profit divided by the equity

[kamilkacprzak]

This is so clearly and logically explained ! Perfect.

[pkn]

Great explanation Stanley. Your examples are very clear and easy to comprehend. I also appreciate that you did not make this explanation excessively long. New subscriber earned! :)

[mezamax]

Best explanation on ROE I've seen. Thanks for the upload!

[saadehmarsel]

Funny that P&Ds that all matter these day, , hedges move markets, retail gets buried let's be real ! great video btw ! don't let my realism bring you down, I actually learned plenty from you ! thank's mate !

[devbalaji]

Thanks for the video and good explanation of the concept. It would be great if you can make short videos on various financial ratios like ROIC, ROCE etc.

[erikhoryza]

Made this concept click really fast. Thank you for this.

[kokteonggan]

Indeed! Every video produce by you, a masterpiece. So clearly explained and any layman can easily understand.

[yoyoong]

i have been repeatedly watching my lecturer's recording video but i still couldnt clearly get the meaning of ROE. But this video just save me from struggling. Thanks!

[deddywirata]

Thank you for sharing! Very well explained..

[mikuronightray]

Thank you! I didn't know how important it was until I watched this video. :)

[yogeshsabnis]

Thank you Stanley for a clear explanation. I appreciate your videos and you now have a new subscriber. From what I understand, would laying off employees help to raise the ROE for a company? Thanks

[WherelsWally]

Hi Stanley, I am finding it hard to understand why higher ROE is better.

Suppose you have 2 companies - Company A and Company B
Company A has $100k in Assets and $90K in Liability (meaning $10k in Equity).
Company B has $100k in Assets and no Liability (meaning $100k in Equity).
Suppose both companies earn $10k in a year.
Company A ROE - 100%
Company B ROE - 10%

Isn't Company B a better company to invest in? Essentially both companies have the same ROA (which is 10%), meaning that both companies are making use of their assets efficiently. But Company B has no liabilities, so why would you invest in Company A that has more liabilities? Correct me if I'm wrong, but I find ROA to be more representative of how "efficient" a company is. I don't quite see why you would use an ROE instead of ROA in any scenario. Would appreciate it if I could get your thoughts on this.

[saifialig]

How can we correlate roe with PE ratio?Any straight formula for it? For example a company with high roe and high PE ratio, how can we know if company is expensive?

[jairzuniga]

Learned a lot from this video, thank you and keep up the good content!

[leophysics]

Does the company pay Roe to investors? As dividend or something else

[chrisolga]

I am a W2 employee trying to learn financial literacy. Thank you. Namaste.

[moonbasealpha]

Does the shareholders equity change if a company had its asset revalued? For example, the equipment is old and gets its value reduced compared to the original purchasing cost. Does their ROE go up?

[bengkeong]

Hi Stanley, may i know how you get 3.6% ROE for Sembcorp in this video?I calcuculated but only got 2.78%.Thanks.