Return on equity compares net profit with shareholders’ equity.
Return on Equity Calculator
Results
Return on equity (ROE)
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Table of Contents
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What is Return on Equity?
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How to Use This Calculator
- Enter or select Net profit, Equity.
- Check the unit beside each measurement. For a percentage or rate, use the scale and time period stated in the form.
- Choose Calculate, then compare the output with the formula and example below. If you change a value or option, calculate again to update the result.
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Formula Used
ROE = net profit/equity × 100
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Variables Explained
| Input | What it means |
|---|---|
| Net profit | Profit after the costs included in the reporting definition for the period. |
| Equity | The shareholder funding or residual ownership value used in the selected ratio. |
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Worked Example
Profit of 30,000 on equity of 200,000 gives ROE=15%.
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Why Use This Calculator?
Compare the result with the underlying statement, budget or proposed transaction. It is most useful when every amount uses the same reporting period and the same accounting definition.
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Common Mistakes
- Small or negative equity can make the ratio misleading, and leverage can raise it without improving operations.
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Frequently Asked Questions
Should I use monthly or annual figures?
Use one consistent period for every amount and rate in the relationship. If a form specifies an annual rate or a monthly amount, follow that label rather than mixing time periods.
Does the result include fees and tax?
Only the costs and taxes represented by the inputs and formula are included. A real transaction can include other charges, so compare the estimate with the underlying agreement or statement.
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Sources & References
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