What Is Return on Equity (ROE)?
Return on Equity (ROE) is a financial ratio that measures how effectively a company generates profits from its shareholders’ equity. It shows how much profit each dollar of common stockholders’ equity generates.[reference:0]
The ROE formula is:
ROE = Net Income ÷ Shareholders’ Equity
The result is expressed as a percentage.[reference:1][reference:2]
How Does the ROE Calculator Work?
This ROE calculator computes the return on equity ratio by dividing net income by shareholders’ equity.[reference:3]It also provides:
- Performance Assessment — evaluates the ROE against industry benchmarks
- DuPont Analysis — breaks down ROE into Net Profit Margin, Asset Turnover, and Equity Multiplier[reference:4][reference:5]
- Visual Breakdown — charts showing the components of ROE
Who Benefits from the ROE Calculator?
This return on equity calculator is designed for:
- Investors evaluating company profitability and management effectiveness[reference:6]
- Financial analysts assessing investment opportunities
- Business owners measuring operational efficiency
- Students learning financial ratio analysis
- Management identifying drivers of profitability
Frequently Asked Questions
What is Return on Equity (ROE)?
Return on Equity (ROE) is a financial ratio that measures how effectively a company generates profits from its shareholders’ equity. It is calculated by dividing net income by shareholders’ equity.
What is the ROE formula?
The ROE formula is: ROE = Net Income ÷ Shareholders’ Equity. The result is expressed as a percentage.[reference:7]
What is a good ROE?
A good ROE varies by industry. Generally, an ROE of 15-20% is considered healthy for established companies. High-growth companies may have ROE above 25%.
What is the DuPont analysis?
DuPont analysis breaks down ROE into three components: Net Profit Margin, Asset Turnover, and Equity Multiplier. It helps identify what is driving the ROE.[reference:8]
What is the difference between ROE and ROA?
ROE measures return on shareholders’ equity, while ROA measures return on total assets. ROE is typically higher because it excludes debt financing.
Is my data stored anywhere?
No. All calculations run locally in your browser. No data is sent to any server.