Which financial performance aspect does return on equity measure?

Return on equity (ROE) specifically measures a company's profitability in relation to the equity that shareholders have invested in the business. It indicates how effectively a company is generating profit from every dollar of shareholders' equity. By comparing net income to shareholders' equity, ROE provides insight into how well a company uses its equity base to generate profits, making it a key indicator of financial performance.

This measurement is important for investors as it helps them assess the efficiency of management in utilizing equity capital to generate earnings. A higher ROE indicates a more effective use of equity financing and suggests better profitability relative to shareholder investments.

In contrast, liquidity, market share, and cost management efficiency focus on different aspects of a company's operations or financial health. Liquidity involves the firm’s ability to meet short-term obligations, market share addresses the company's relative position in the industry, and cost management efficiency looks at how well a business controls its operational expenses. Each of these areas contributes to overall business health, but they do not pertain to the specific relationship between profitability and shareholder equity like ROE does.