Investing
Return on equity
Profit generated per unit of owners' capital. Multiply by a hundred for a percentage.
The Formula
ROE = net income / shareholders equity
Profit generated per unit of owners' capital. Multiply by a hundred for a percentage.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| ROE | Return on equity | ratio | Profit per unit of shareholders equity. |
| NI | Net income | currency | Profit after all expenses and tax. |
| E | Shareholders equity | currency | Total assets minus total liabilities. |
What Each Symbol Means
ROEratio
Return on equity
Profit per unit of shareholders equity.
NIcurrency
Net income
Profit after all expenses and tax.
Ecurrency
Shareholders equity
Total assets minus total liabilities.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate return on equity page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Return On Equity, filed under Finance. Every number the guide produces comes from substituting into this one line.