ROE Calculator
Compare a period of net income with average book equity, or solve for the income or equity implied by a target ratio. The result is an accounting ratio, not a shareholder investment return.
Net income for the chosen period; match the equity ownership scope
Enter average equity for that period, such as (beginning + ending) / 2
Average total assets over the same period; leave blank to omit the multiplier
Calculate Return on Equity
Enter net income and shareholder equity to calculate the return on equity percentage.
Compare with consistent peer and historical definitions; no universal quality grade is assigned.
Average Total Assets / Average Shareholder Equity (Leverage Ratio)
Period Profit or Loss
Average Book Equity
ROE Formula
Check the denominator
A small equity base can make ROE large without improving profit. Share buybacks, accumulated losses, leverage, and one-time gains can change the interpretation. No industry benchmark dataset is loaded here.Use Matching Periods and Ownership Definitions
Net income is measured over a period, while equity is a balance-sheet stock. Enter average shareholder equity over the same period. A simple approximation is (beginning equity + ending equity) / 2; more frequent observations can matter after large buybacks, issuances, or acquisitions. This calculator uses the average you enter and does not fetch filings or calculate that average for you.
All amounts are displayed in dollars. Use the same currency and scale for income, assets, and equity; no currency conversion occurs. For common-equity ROE, use income attributable to common shareholders and average common equity consistently. Do not combine consolidated income including other owners with only the parent's common equity.
Three Algebraic Modes
- ROE (%) = period net income ÷ average equity × 100.
- Implied net income = target ROE ÷ 100 × average equity.
- Implied average equity = net income ÷ (target ROE ÷ 100). A zero target cannot determine a unique positive equity base.
For 500,000 of income and 2,500,000 of average equity, ROE is 20%. At the same equity, a 10% scenario implies 250,000 of income. These identities do not establish that a company can earn that income or choose its equity independently of financing decisions.
Zero, Losses, and Negative Equity
Zero income with positive equity gives 0% ROE. A loss of 100,000 over positive average equity of 2,500,000 gives −4%. This calculator excludes zero and negative average equity: division by zero is undefined, while a negative denominator can reverse the sign and make comparisons misleading. Blank required inputs are not treated as zero.
Read ROE with the Equity Multiplier
The optional multiplier is average total assets ÷ average equity. With 5,000,000 of assets and 2,500,000 of equity it is 2.00. Using consistent periods and ownership scope, the three-part DuPont identity is:
ROE = (Net income / Revenue) × (Revenue / Average assets) × (Average assets / Average equity)
The revenue and average-asset terms cancel algebraically. This page calculates ROE and the multiplier; it has no revenue input and does not calculate the other two components. A higher multiplier can raise ROE but also indicates a smaller equity cushion relative to assets.
There Is No Universal Good-ROE Cutoff
Compare firms with similar businesses, accounting policies, and leverage using the same period definition. A high ratio can come from profit growth, a shrinking denominator, or nonrecurring income. It does not by itself prove management quality, dividend capacity, competitive advantage, or stock undervaluation. Inspect cash flow, debt, and the equity reconciliation.
ROA uses assets rather than equity as its denominator. ROIC uses an operating-profit and invested-capital definition. Neither is interchangeable with this net-income ROE calculation, and none alone predicts stock-price returns.
Definitions: CFA Institute financial ratio list gives ROE and the average-assets equity multiplier; SEC financial-statement guidance distinguishes period income from balance-sheet equity.
Frequently Asked Questions
Should I enter ending or average equity?
Enter average equity over the income period. A simple beginning-and-ending average is (beginning + ending) / 2; large changes during the period may warrant more frequent observations. The calculator does not compute the average automatically.
Can I calculate a negative ROE?
Yes. Negative income over positive average equity produces a negative ROE. Zero or negative average equity is excluded because the ratio is undefined or difficult to compare economically.
Is ROE the return I earn on the stock?
No. It compares accounting income with book equity. Your investment return depends on purchase and sale prices, distributions, costs, and taxes, none of which are modeled here.
What do the inverse calculation modes mean?
They rearrange the same identity. A target ROE and positive equity imply an income amount; income and a nonzero target imply an equity base if it is positive. These are scenarios, not earnings forecasts or financing recommendations.
Does this tool grade companies against peers?
No. It has no live company data or benchmark dataset. The default figures and percentage shortcuts are examples. Use comparable filings and check leverage, nonrecurring items, and ownership scope before interpreting ROE.
Continue Your Financial-Statement Research
Use the calculated ratio to guide questions about income, leverage, and equity changes. Explore Pineify research tools and their available data before selecting a workflow.
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