Return On Equity Calculator
Return on equity is the single number that says how hard a company is working with the money its owners have actually put in.
Return on equity
25.00%
- Net income
- $250,000.00
- Shareholders equity
- $1,000,000.00
- Equity to income ratio
- 4
Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.
The formula this calculator uses
return on equity = net income / shareholders equity
- ROE
- Return on equity, as a percentage
- NI
- Net income for the period, after all expenses and tax
- E
- Shareholders equity, assets minus liabilities
How to check the result by hand
- 1
Take net income from the income statement
Use the figure after interest, tax and any exceptional items. Operating profit is a different number and using it overstates the return.
- 2
Take shareholders equity from the balance sheet
Total assets minus total liabilities. Where possible average the opening and closing balances, since the profit was earned across the whole year.
- 3
Divide net income by equity
Two hundred and fifty thousand divided by one million is 0.25. This decimal is the return, and it will always be expressed per year.
- 4
Multiply by a hundred for a percentage
0.25 becomes twenty five percent. Keep the decimal if the figure feeds into a further calculation such as a discounted cash flow.
- 5
Check the debt load before judging the number
A high ratio built on borrowed money carries more risk than the same ratio achieved with owners' capital. Compare the equity multiplier alongside.
For worked examples, common mistakes and the limits of this formula, read the full How To Calculate Return On Equity page.