Return on Equity (ROE) Calculator
Work out return on equity from net income and shareholders' equity, using year-end or average equity.
Quick answer
Return on equity measures profit earned on shareholders' money: (net income - preferred dividends) divided by shareholders' equity, using ending, beginning or average equity for the period.
Return on Equity (ROE) Calculator
Leave at 0 if there are no preferred shares.
Return on Equity
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Earnings to Common
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Equity Used
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ROE by Equity Basis
| Basis | Equity (₹) | ROE |
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Assumptions & method
- ROE = (net income − preferred dividends) ÷ shareholders' equity.
- Average equity = (beginning equity + ending equity) ÷ 2. With a single balance, that balance is used as given.
- If the equity used is zero or negative, ROE is shown as not meaningful rather than as a number.
- Net income and equity should come from the same period and the same basis of accounting.
- Not included: adjustments for one-off items, share issues or buybacks during the year, or comparison with peers.
Results are estimates based on the figures you enter. They are not guarantees and not financial advice.
What return on equity tells you
Return on equity compares the profit a business earns with the equity that owners have put in or left in the company. It answers a simple question: how hard is each unit of equity working? Because it uses only equity in the denominator, it rises when a company borrows more, even if operations are unchanged. That is why analysts look at ROE next to debt levels and break it into margin, asset turnover and leverage. This calculator takes net income, optional preferred dividends and equity, and shows the ratio under beginning, ending and average equity so you can see how much the basis matters.