Lingo every investor should know

Sorry, caviar fans, but ROE does not refer to pricey fish eggs, sometimes called roe. Rather, it stands for return on equity. ROE is a company's annual income divided by shareholders' equity. Shareholders' equity is a company's assets minus its liabilities. It also is called book value. It can be found on companies' balance sheets in their annual report.

If you're investigating a particular company, ROE is a good way to compare its profitability compared to the companies it competes against. Just remember that ROE -- good or bad -- isn't necessarily a prediction of where a company's stock will head.