Return on equity (ROE) calculator
Measures how much profit the company earns on each unit of money its owners have put in.
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How to use it
- Enter net income for the period, equity at start (or a single figure) and equity at end (optional).
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Average equity = (opening equity + closing equity) ÷ 2, or the opening figure alone. ROE = net income ÷ average equity × 100.
Example
Inputs: Net income for the period = 120,000, Equity at start (or a single figure) = 900,000, Equity at end (optional) = 1,100,000. Result: Return on equity: 12%; Average equity used: 1,000,000.00.
Limits and caveats
- High leverage lifts ROE without better operations, so read it with the debt to equity ratio.
- Meaningless when equity is negative.
Questions about this tool
Why use average equity?
Profit was earned across the period while equity changed, so the average is fairer than the year-end figure.
Is a high ROE always good?
Usually, but it can be inflated by heavy debt or small equity after past losses.
How do I calculate it for a quarter?
Use the quarter net income, and multiply by 4 if you want a rough annual figure.