ConverterHub

Return on Equity (ROE) Calculator

Find your return on equity.

How it is calculated

Return on equity is ROE = net income / shareholders' equity × 100. Net income is the profit after all expenses, interest and taxes for the period; equity is the book value attributable to owners (assets minus liabilities). Use the same currency for both numbers, and use the period's net income against equity at the same date or an average over the period. The tool requires equity to be greater than zero; with zero or negative equity it gives no result, because the ratio stops being meaningful. A negative net income is accepted and produces a negative ROE. The result is a percentage with two decimals.

Worked example

A company earns a net income of 250,000 and has shareholders' equity of 1,600,000. Divide: 250,000 / 1,600,000 = 0.15625. Multiply by 100 to express it as a percentage: 15.63%. In other words, each unit of owners' capital generated about 0.16 units of profit over the period.

Try this example →

Common mistakes

  • Using operating profit or revenue instead of net income.
  • Using total assets in the denominator, which gives ROA instead of ROE.
  • Mixing a full-year profit with a quarterly equity figure, or a quarterly profit that has not been annualised, when comparing firms.
  • Entering the figures in different units (one in thousands, one in full currency units).
  • Reading a very high ROE as strength when it is caused by tiny equity after large losses or buybacks.

About this calculator

This calculator finds Return on Equity, ROE = Net Income ÷ Shareholder Equity, a percentage that shows how efficiently a company turns the money shareholders have invested into profit.

Stock analysts and investors use ROE to compare companies within the same industry — a consistently high ROE (think 15-20%+) is often a sign of a well-run business with a competitive advantage. Company finance teams also track it internally as a key performance metric alongside ROA and profit margin.

Was this helpful?

You can pick up to 3 reactions.

Comments

  • Be the first to comment.

Popular calculators

Loan Calculator

Monthly payment, total interest and full amortization schedule.

Percentage Calculator

Percent change, percent of, and ratio calculations.

Discount Calculator

Calculate final price, savings, and discount amount.

BMI Calculator

Body mass index from height and weight (metric or imperial).

Age Calculator

Compute your exact age in years, months and days from a birth date.

Compound Interest Calculator

Calculate the final amount and interest earned with compounding.

All Calculators