Return on Equity Calculator
Calculate return on equity (ROE) from net income and shareholders’ equity to see how efficiently a company turns equity into profit.
How it works
ROE = net income ÷ shareholders’ equity × 100
Return on equity measures how much profit a company generates for every dollar of shareholders’ capital — the core test of how well management deploys the owners’ money. A consistently high ROE is a hallmark of a quality business, but the ratio can be flattered by heavy borrowing, since debt shrinks equity without cutting profit. Read ROE alongside return on assets and the debt-to-equity ratio to see whether the returns come from genuine efficiency or from leverage.
Worked example
A company earning $10,000,000,000 on $50,000,000,000 of shareholders’ equity has an ROE of 10,000,000,000 ÷ 50,000,000,000 × 100 = 20% — a strong return, meaning it produces 20 cents of profit per dollar of equity.
Frequently asked questions
What is a good ROE?
Around 15%–20% is generally considered strong, though it varies by industry. More important than a single year is a high, stable ROE sustained over time without excessive debt.
How can debt inflate ROE?
Borrowing lets a company hold less equity while keeping profit up, which raises the ratio. A high ROE built on heavy leverage is riskier than the same ROE from an unlevered business.
How does ROE differ from ROA?
ROE measures profit against equity only; ROA measures it against all assets, debt included. Comparing the two reveals how much of the return comes from leverage.
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Educational estimate, not investment advice. Ratios and valuation models are simplifications; verify figures against official filings and consult a licensed advisor before investing.