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Finance GlossaryReturn on Equity (ROE)
Return on Equity (ROE)
Definition of Return on Equity (ROE)
The Return on Equity is a metric that helps to find the how effectively a company uses the money of its shareholders to generate profits. The ROE can be obtained by dividing the new profit generated by the equity of shareholders. When a company has a higher ROE, it implies that it has a strong management and strong profitability. Investors often compare the companies within the same sector using the ROE. The ROE also helps investors determine the potential of the company to generate wealth in the long term.
Related Terms
Trendline
A trendline is a straight line drawn on a price chart to indicate the direction of a market trend. It connects a series of higher lows in an uptrend or lower highs in a downtrend. Trendlines help identify support and resistance levels, assess trend strength, and anticipate potential breakouts or reversals.
Liabilities
Liabilities are debt that a company owes to individuals or financial institutions in the form of bonds, debentures, salary, tax, and others.Liabilities play an important role in the balance sheet of a company as it signals competence to existing and prospective stakeholders.
Average True Range Atr
The Average True Range (ATR) is a technical indicator used to measure market volatility, typically using the average of true ranges from 14 periods that can be daily, weekly, monthly, or even intraday values.
The formula for ATR is:
ATR = Previous ATR (n - 1) + True Rangen / n
n= number of periods
True Range = The greater/highest of these:
The formula for ATR is:
ATR = Previous ATR (n - 1) + True Rangen / n
n= number of periods
True Range = The greater/highest of these:
- High - low (Day 1)
- Absolute value of (Day 1’s high - Day 0’s close)
- Absolute value of (Day 1’s low - Day 0’s close)
India VIX
India VIX is an index that measures volatility and market sentiment. The term VIX stands for Volatility Index and thus, the full form of India VIX is Indian Volatility Index.
A higher India VIX means higher volatility whereas India VIX would be lower due periods of low volatility. In fact, there are absolute values that help understand volatility via India VIX.
India VIX typically moves between 15 to 30, which represents a range that is considered “normal” as far as volatility is concerned.
However, India VIX has touched 90 during the 2008 financial crisis and trended near the value once again when the pandemic broke out in 2020.
A higher India VIX means higher volatility whereas India VIX would be lower due periods of low volatility. In fact, there are absolute values that help understand volatility via India VIX.
India VIX typically moves between 15 to 30, which represents a range that is considered “normal” as far as volatility is concerned.
However, India VIX has touched 90 during the 2008 financial crisis and trended near the value once again when the pandemic broke out in 2020.
Defensive Stock
A defensive stock refers to the shares of iconic companies that generate stable and consistent returns and dividends, regardless of the market conditions.
Defensive stocks are rare because companies that have defense against every market condition are rare.
While defensive stocks may not generate high returns, they are known to add stability and defense against declining economic conditions. In India, stock of ITC Limited is an example of a defensive stock.
Defensive stocks are rare because companies that have defense against every market condition are rare.
While defensive stocks may not generate high returns, they are known to add stability and defense against declining economic conditions. In India, stock of ITC Limited is an example of a defensive stock.
Delivery Date
The delivery date of a cash or derivative contract refers to the final day and time on which the underlying asset should be delivered to the contract holder to fulfil the terms and obligations of the contract.
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