Stockholders' equity or shareholders equity is the difference between a company's assets and liabilities. This includes common stock, retained earnings, and more.

Generally, companies with durable competitive advantages tend to have above-average returns on shareholders' equity. Some examples, from years prior to 2008: Coca-Cola: 30%. Hershey's (HSY): 33%.

Return on equity (ROE) measures how well a company generates profits for its owners. It is defined as the business’ net income relative to the value of its shareholders' equity. It reveals the ...