Return on equity is a fraction with a company’s profits in the numerator and the total value of equity in the denominator. If a company has $1 billion in shareholder equity and $100 million in profits in a year, they have a 10% return on equity. It’s worth flagging that shareholder equity here is not measured as market capitalization–it is measured as the difference in value between a company’s assets and its liabilities. Industry standard is around 14%. Return on equity tends to be much higher than return on assets.