Return On Equity (ROE) is a financial metric that measures a company's profitability in relation to shareholders' equity. It indicates how effectively a company uses its equity to generate profits. ROE is calculated by dividing net income by average shareholders' equity, expressed as a percentage. A higher ROE suggests that a company is efficient in generating returns for its investors. Investors often use ROE to compare the financial performance of different companies within the same industry. A consistently high ROE can signal a strong business model and effective management, making it an important factor in investment decisions.