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 the money invested by its shareholders 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 at turning equity investments into profit, making it an attractive option for investors. However, it's essential to compare ROE with industry peers to assess performance accurately, as different sectors may have varying benchmarks for what constitutes a good ROE.