ROE Calculator
Calculate return on equity from net income and average shareholder equity to see how well a company turns capital into profit.
Company figures
Return on equity
Enter net income and equity.
ROE is the most watched profitability ratio
Return on equity is net income divided by average shareholder equity. It shows how well a company turns the owners' capital into profit. Investors compare ROE across years and against competitors to judge management quality.
An ROE of 15% or more is healthy over the long term for most industries. Software and other asset-light businesses regularly go above 25%. A persistently low ROE is a warning sign that capital is being put to poor use.
Read ROE with care
A high ROE can come from heavy borrowing rather than strong operations, because debt shrinks equity. Check the debt-to-equity ratio alongside ROE before drawing conclusions.
Frequently asked questions
Net income or operating income?
ROE uses net income, after interest and taxes. To compare operational efficiency regardless of how a company is financed, use return on invested capital (ROIC).
Why use average equity?
Equity changes during the year. Averaging the start and end figures matches the profit, which was earned over the whole year.