ROE Hero – Profitability Challenge
ROE (Return on Equity) shows how efficiently a company generates profit from shareholder funds. Become an ROE Hero by calculating ROE from Net Profit & Equity.
How to Play: Enter the ROE for each question. Click Check Answers to get instant results.
What Is ROE (Return on Equity)?
ROE tells how effectively a company generates profit using shareholder equity. It is one of the most important profitability metrics for investors.
ROE Formula:
ROE (%) = (Net Profit ÷ Shareholder Equity) × 100
Why ROE Matters
- Shows business efficiency
- Indicates quality of management
- Helps compare profitability between companies
- Used by value investors to identify strong businesses
This game trains you to calculate ROE quickly so you can evaluate companies with confidence.
Understanding ROE in Simple Words
ROE tells you:
👉 How much profit the company generates from every ₹1 of shareholder money.
If ROE = 20%, it means the business earns ₹0.20 for every ₹1 invested by shareholders.
A high ROE generally signals:
- Good management
- Efficient operations
- Strong financial performance
A low ROE may signal:
- Poor profitability
- Ineffective use of equity
- Weak business model
❓ Frequently Asked Questions (FAQ)
- What is a good ROE?
A ROE between 15%–25% is considered strong for most industries.
- Can ROE be negative?
Yes.
If the company makes a loss (negative profit), ROE becomes negative — a sign of poor performance.
- Should ROE be compared across industries?
No.
Different industries have different ROE norms.
Always compare companies within the same sector.
- Does high ROE always mean a good company?
Not always.
Sometimes ROE becomes artificially high due to:
- Excessive debt
- Low equity base
- Buybacks reducing equity
Always check debt levels.
- What skills will I learn from the ROE Hero game?
You’ll understand:
- How Net Profit and Equity interact
- How profitability is measured
- How investors evaluate management efficiency
- How to quickly compute ROE in your head
- Is ROE useful for stock picking?
Absolutely.
High, consistent ROE companies often outperform the market over time.