what causes roe to increase 
roe will increase as net income increases all else equal another way to boost roe is to reduce the value of shareholders equity since equity is equal to assets minus liabilities increasing liabilities e g taking on more debt financing is one way to artificially boost roe without necessarily increasing profitability this can be amplified if that debt is used to engage in share buybacks effectively reducing the amount of equity available the bottom linereturn on equity is a common financial metric that compares a company s income to its total shareholders equity this demonstrates a company s profitability and efficiency another useful calculation is the return on average equity roae however though roe and roae can tell you how well a company is using resources to generate profit they do not provide a full picture of a company s financing structure industry or performance against competition roe is just one of many metrics that investors can use to evaluate a company s performance potential growth and financial stability 