In finance, financial profitability, profitability for the shareholder or "ROE" (for its initials in English, return on equity) relates the economic benefit to the own resources necessary to obtain that profit. For a company, ROE indicates the profitability obtained by shareholders (the only providers of capital that do not have a guaranteed return) on the capital they have invested, excluding third-party resources, such as financial debt.

Financial profitability can be understood as a measure of the profit that a company obtains in relation to the funds invested by shareholders. It is usually expressed as a percentage.

The financial profitability, ROE, is calculated:

For example, if one million is placed in an account and the interest generated is one hundred thousand, the profitability is 10%. The profitability of the account is calculated by dividing the amount generated and the amount needed to generate it.

By adding the tax on the company's income to the numerator of the previous ratio, the financial profitability before taxes is obtained. When the economic profitability is higher than the cost of debt (now expressed as a percentage, to be able to compare, and not in absolute value as previously), the higher the degree of debt, the greater the value of the financial profitability or profitability of the shareholders, by virtue of the game of the so-called leverage effect. On the contrary, when the economic profitability is lower than the cost of debt (external capital yields less in the company than it costs), the opposite effect occurs: debt erodes or reduces the profitability of own capital.

In order to be able to carry out a more detailed analysis of the causes that generate profitability, the DuPont company developed the DuPont formula at the beginning of the century, which breaks down the previous formula into three terms:

It allows the company to divide its return into the components of profit on sales and efficiency on the use of assets.

Other variables that affect financial profitability can be introduced into the expression: sales and assets.

By decomposing and expanding the expression we obtain:

The first two components are shown in the previous section, the margin and the rotation. The third component is leverage, which is defined as the relationship between investments (the asset) and the company's own resources. The first two components are derived from the business operations, while the third is the financial aggregate. An ROE that increases due to growth in Margin or Turnover is an ROE that grows for business reasons, while an ROE that grows due to an increase in leverage shows a company that has an increase in its financial risk.[1]​.