Edited sentence: But not all high-ROE companies make good investments.It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities).It shows how well a company uses investment funds to generate earnings growth.ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total  equity (excluding preferred shares), expressed as a percentage.Return on Equity (ROE, Return on average common equity, return on net worth, Return on ordinary shareholders' funds) (requity) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners.Some industries have high ROE because they require no assets, such as consulting firms