Finance calculator
Return on Equity Calculator
Calculate return on equity from net income and average shareholders' equity, with a quick profit-to-equity interpretation.
FormulaReturn on equity = net income / average shareholders' equity
Formula
ROE formula
ROE should be compared with debt levels, accounting quality, and industry context before drawing conclusions.
Return on equity = net income / average shareholders' equity
Net income of 120,000 on average equity of 800,000 gives ROE = 15%.
SourcesThis calculator includes source notes, assumptions, and exclusions so the result is easier to verify before use.
Sources and assumptions
Source notes
This calculator includes source notes, assumptions, and exclusions so the result is easier to verify before use.
- Effective year
- Current rules
- Last verified
- 2026-06-18
ROE should be compared with debt levels, accounting quality, and industry context before drawing conclusions.
Assumptions
- Net income and average equity cover the same accounting period.
- Average equity can be entered from beginning and ending equity or another consistent average.
- The ratio is shown before any industry-specific normalization.
Not included
- One-time adjustments, preferred dividends, negative equity interpretation, leverage decomposition, and accounting-standard differences.
FAQ7 common questions for this calculator.
FAQs
What does ROE show?+
ROE shows how much profit a company generated relative to average shareholders' equity.
Can high ROE be risky?+
Yes. Heavy debt, low equity, or one-time gains can make ROE look strong even when risk is high.
What if equity is zero or negative?+
The calculator marks the ratio undefined because ordinary ROE interpretation no longer works cleanly.
How does the Return on Equity Calculator calculate the result?+
For the Return on Equity Calculator, it uses the ROE formula: Return on equity = net income / average shareholders' equity. Net income of 120,000 on average equity of 800,000 gives ROE = 15%.
What information do I need to use the Return on Equity Calculator?+
For the Return on Equity Calculator, enter net income and average shareholders' equity,. Keep the units consistent with the calculator fields and compare your setup with the worked example on the page.
How accurate is the Return on Equity Calculator?+
Return on Equity Calculator is accurate for the rates, amounts, dates, and rules entered. It uses the ROE formula shown on this page. Real products can differ because of fees, taxes, contract terms, or changing official thresholds.
What should I check before using the Return on Equity Calculator result?+
For the Return on Equity Calculator, check net income and average shareholders' equity,, then compare the ROE formula and worked example with the contract or source you will rely on. Fees, tax year, currency, and payment timing can change the final decision.
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How to use the Return on Equity Calculator
Calculate return on equity from net income and average shareholders' equity, with a quick profit-to-equity interpretation. The page also explains the ROE formula and shows a practical example: Net income of 120,000 on average equity of 800,000 gives ROE = 15%.
- 1
Enter your details
Enter net income and average shareholders' equity,, then complete any other fields shown in the calculator.
- 2
Check the calculation
Review the result alongside the ROE formula: Return on equity = net income / average shareholders' equity.
- 3
Compare scenarios
Change one or more inputs to see how they affect the return on Equity Calculator result before you use the estimate.