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ROE Calculator

Calculate Return on Equity (ROE) to measure how efficiently a company generates profit from shareholder investment.

Enter net income and shareholder's equity to calculate ROE.

Profit after all expenses, taxes, and interest — from the income statement.
Total assets minus total liabilities — from the balance sheet.

Why ROE Matters

Return on Equity (ROE) measures how effectively a company generates profit from the money shareholders have invested. It’s one of the most important metrics for investors, analysts, and executives to evaluate financial performance and management efficiency.

How to Use This Calculator

  • Net Income: Found on the income statement (after taxes and expenses).
  • Shareholder's Equity: On the balance sheet (Assets − Liabilities).
  • Click “Calculate ROE” to see the percentage return on equity.

Formula Used

ROE = (Net Income ÷ Shareholder's Equity) × 100

Example: $75,000 net income, $500,000 equity →
ROE = (75,000 / 500,000) × 100 = 15%
This means the company generates $0.15 in profit for every $1 of shareholder equity.

Interpreting the Results

ROEInterpretation
0% – 10%⚠️ Low — May indicate poor management or competitive pressure
10% – 15%✅ Average — Typical for many stable industries
15% – 20%✅ Strong — Efficient use of capital
20%+✅ Excellent — Top-tier performance (e.g., tech, SaaS)

Real-World Applications

  • Investors: Compare companies before buying stock
  • Fund Managers: Screen high-performing stocks for portfolios
  • CEOs: Track management effectiveness and strategy success
  • Lenders: Assess long-term profitability for loan risk
  • Startups: Show investors how efficiently capital is used

Industry Benchmarks (Average ROE)

  • Technology (SaaS): 20% – 35%
  • Consumer Goods: 15% – 25%
  • Financial Services: 10% – 15%
  • Retail: 8% – 12%
  • Utilities: 8% – 10%

Always compare ROE within the same industry — capital intensity varies widely.

Tips to Improve ROE

  • ✅ Increase net income via pricing, cost control, or sales growth
  • ✅ Optimize asset use — improve inventory or receivables turnover
  • ✅ Use debt strategically (increases ROE via leverage — but increases risk)
  • ✅ Buy back shares — reduces equity, increases ROE (if profitable)
  • ✅ Focus on high-margin products to boost profitability

Limitations of ROE

ROE can be misleading if used alone:

  • ❌ High ROE from excessive debt (risky)
  • ❌ Share buybacks can inflate ROE without real growth
  • ❌ Varies by industry — not comparable across sectors
  • ❌ One-time gains can distort results

Always use ROE alongside ROA (Return on Assets), debt-to-equity, and EPS for a full picture.

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