Return on Equity Calculator

Measure net income as a percentage of shareholders' equity to assess how well management generates returns for investors.

Method

Net Income ($)

Shareholders' Equity ($)

Return on Equity

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Enter values to calculate ROE

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Industry use cases

Tech Stock Selection Retail investors calculate and compare ROE across software companies to identify which generates better profits from shareholder capital.

Management Performance Review CFOs track quarterly ROE trends to assess management's efficiency in deploying shareholder capital and communicate results to the board.

Industry Competitor Analysis Equity research analysts benchmark a company's ROE against industry peers to evaluate competitive positioning and profitability efficiency.

Acquisition Target Evaluation Private equity firms calculate ROE during due diligence to assess how efficiently target companies generate returns on invested capital.

Frequently asked questions

What is Return on Equity (ROE)?

ROE measures how efficiently a company generates profit from shareholders' equity by dividing net income by shareholders' equity. It shows how well management uses investor capital to create profits.

What is a good return on equity percentage?

A typical ROE is 10-15%. Below 10% suggests poor performance, while above 20% indicates excellent management performance. Compare your company's ROE to industry peers for context.

Can return on equity be negative?

Yes. A negative ROE occurs when a company has a net loss, indicating losses relative to shareholder investments. This is a red flag for company performance.

What's the difference between ROE and profit margin?

Profit margin shows earnings as a percentage of sales, while ROE shows earnings as a percentage of shareholders' equity. ROE is a broader measure of how capital generates profit.

What does DuPont analysis tell you about ROE?

DuPont breaks ROE into profit margin, asset turnover, and equity multiplier components. This identifies which factors drive ROE—profitability, efficiency, or leverage.

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