Return on Equity (ROE) Calculator

A return on equity calculator, or ROE calculator, shows how much profit your business earns on every dollar that owners and shareholders have invested. You enter two figures, your net income for the period and your shareholder equity, and the tool divides one by the other and multiplies by one hundred to express the result as a percentage. Net income is the profit remaining after all expenses, interest and tax, taken from the bottom of your income statement, while shareholder equity is the owners stake in the business, made up of share capital plus retained earnings on the balance sheet. The result tells you how many cents of profit the business generates for each dollar of equity, so an ROE of eighteen percent means every dollar of owner funding produced eighteen cents of profit during the period. ROE is one of the most watched measures of profitability because it speaks directly to the returns owners receive, and investors use it to compare opportunities and judge how well management is deploying their capital. A higher ROE usually signals stronger returns, but it must be read with care, because heavy borrowing can inflate the figure while also raising risk, so a high ROE built on large debt is not the same as one built on genuine operating strength. The right level depends on your industry and the returns available elsewhere. To use it well, calculate it consistently, track the trend over several periods, and benchmark against similar businesses. Many analysts use average equity across the period rather than the closing balance, and pair ROE with return on assets and the debt to equity ratio to see the full picture of profitability and risk.

ROE = net income / shareholder equity x 100. Estimate only, not financial or tax advice.