Related to Equities: Return on equity (ROE) is net income divided by average common equity. ROE can vary widely among companies and is a measure of profitability. Higher numbers typically indicate higher profitability. However, there are several exceptions.

Related to Mutual Funds: An indicator of profitability. Return on equity for an individual company is calculated by dividing net income for the most recent fiscal year by common stockholders' equity (Assets minus liabilities). A fund's return on equity is calculated by averaging the return on equity of all companies whose securities are held in the fund's portfolio.