Calculating Return on Equity (ROE)

During a recent analysis of Company X's financial statements, an analyst found that the company's net income was $250,000, and its total equity amounted to $1,250,000. To better understand the profitability of shareholders' equity, the analyst is interested in calculating the Return on Equity (ROE).

Return on Equity (ROE) is a crucial measure that indicates how effectively management is using a company’s assets to create profits.

What is the Return on Equity (ROE) for Company X?