ROE Calculator
Calculate Return on Equity (ROE) to measure how effectively a company generates profit from shareholders' equity. Free online ROE calculator for investors and business owners with instant percentage results.
About This Calculator
About Return on Equity (ROE) Calculator
Our Return on Equity (ROE) Calculator helps investors, analysts, and business owners measure how effectively a company generates profit from shareholders' equity. ROE is one of the most important financial ratios for evaluating management performance and comparing investment opportunities. By simply entering the company's net income and shareholders' equity, you get an instant ROE percentage with supporting financial details.
The ROE formula is: ROE = (Net Income / Shareholders' Equity) × 100%. For example, a company with net income of $500,000 and shareholders' equity of $2,500,000 has an ROE of 20%, meaning it generates $0.20 of profit for every dollar of equity invested. A higher ROE indicates more efficient use of shareholder capital.
ROE is widely used in fundamental analysis across global markets. Indian investors evaluate NSE and BSE stocks using ROE alongside P/E and debt ratios. US investors rely on ROE for S&P 500 company analysis, while UK investors use it for FTSE 350 valuations. ROE should always be compared within the same industry, as capital-intensive industries naturally have lower ROE than asset-light businesses.
Frequently Asked Questions
What is Return on Equity (ROE)?
Return on Equity (ROE) is a profitability ratio that measures how much profit a company generates from shareholders' equity. It indicates how effectively management uses investor capital to create earnings. ROE is calculated by dividing net income by shareholders' equity and is expressed as a percentage.
How do you calculate ROE?
ROE is calculated by dividing net income by shareholders' equity and multiplying by 100. The formula is: ROE = (Net Income / Shareholders' Equity) × 100%. For example, if a company has net income of $34,500 and shareholders' equity of $456,000, its ROE would be 7.57%.
What is a good ROE percentage?
A good ROE typically ranges between 10% and 15%, though it varies by industry. An ROE above 15% to 20% is generally considered strong, indicating effective use of shareholders' equity. A very high ROE above 30% may indicate strong competitive advantages but should be examined for sustainability.
What does a low ROE indicate?
A low ROE (below 10%) may indicate that a company is not efficiently using shareholders' equity to generate profits. However, low ROE can also result from high equity levels from retained earnings, recent equity raises, or industry-specific factors. Utility companies and mature industries often have lower ROE.
Can ROE be negative?
Yes, ROE can be negative when a company reports a net loss. A negative ROE indicates the company is not generating profit from its equity base and is destroying shareholder value. Sustained negative ROE is a red flag for investors.
What is the difference between ROE and ROA?
ROE measures return on shareholders' equity only, while ROA (Return on Assets) measures return on total assets including both equity and debt. ROE is typically higher than ROA for companies that use debt financing, as leverage amplifies returns to equity holders.
How is ROE used by investors in India, US, and UK?
Investors across India, US, and UK use ROE to compare companies within the same industry. Indian investors look for ROE above 12-15% for NSE/BSE listed stocks. US investors typically target ROE above 15% for S&P 500 companies. UK investors consider 10-15% as healthy for FTSE 350 companies. ROE should always be compared within the same industry and region.