If a company has a return on equity ratio of 17%, what does it mean?

A return on equity (ROE) ratio of 17% indicates that the company generates $0.17 of net income for every $1 invested by shareholders. This measure reflects how effectively the company is using its equity base to generate profit. A higher ROE typically signifies that the company is more efficient in turning equity financing into profits, which is a positive signal for investors looking for solid financial performance.

This specific interpretation aligns with the concept of return on equity, which is calculated by dividing net income by shareholder equity. The results provide insights into a firm's profitability relative to shareholders' equity, allowing stakeholders to assess how well their capital is utilized within the business. This understanding is essential for making informed investment decisions.