A simple percentage comparison between the profits generated by a business and the equity (or risk capital and shares) that the company needed to generate that profit. Eg I have Â£1 Million shares in a business and make Â£100,000 profits per annum = 10% Return On Equity.
I make a Â£1 Million profit every year. This sounds good, but if I have issued Â£100 Million of shares to provide funds to deliver this amount then this return is not so good after all. This is because I have only returned 1% on the equity or shares used in the business to realise this profit.