Return on Equity Calculator: Net Income Over Shareholders' Equity
Work out a company's return on equity — the headline profitability metric for shareholders, and the figure Warren Buffett famously watches more closely than earnings growth alone.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Return on equity | Non-return share |
|---|---|---|
| $50k income · $500k equity | 10.00% | 90.00% |
| $2M income · $10M equity | 20.00% | 80.00% |
| $200k income · $800k equity | 25.00% | 75.00% |
| $80k income · $1M equity | 8.00% | 92.00% |
How This Calculator Works
Enter net income (profit after all expenses, interest, and tax) and average shareholders' equity over the same period. The calculator divides one by the other and multiplies by 100 to give ROE, with the non-return share shown alongside.
The Formula
Part as a Percentage of a Whole
Part is the portion, Whole is the total it belongs to
Worked Example
A company earning $50,000 of net income on $500,000 of average shareholders' equity posts a 10% ROE — shareholders are earning a 10% return on the book value of what they own. S&P 500 ROE has historically averaged 12% to 16%; top-quartile businesses sustainably clear 20%.
Key Insight
ROE rewards both efficient operations and aggressive leverage — a company can post a high ROE either by generating great profit on its capital or by carrying a lot of debt. DuPont analysis breaks ROE into three drivers: profit margin, asset turnover, and equity multiplier (leverage). High ROE from operations is durable; high ROE from leverage is fragile.
Frequently Asked Questions
How is return on equity calculated?
Divide net income by shareholders' equity and multiply by 100. $50,000 of net income on $500,000 of equity is a 10% ROE.
What is a good ROE?
S&P 500 averages 12% to 16%; quality businesses sustainably clear 20%; weak companies often run single digits or negative. Compare against industry peers and against the company's history.
Why is ROE preferred over net income?
Net income alone hides scale — a $50M profit looks impressive until you learn the company has $500M of equity earning only 10%. ROE puts profit in context against the capital used to generate it.
What is DuPont analysis?
A breakdown of ROE into three drivers: profit margin (net income/revenue), asset turnover (revenue/assets), and equity multiplier (assets/equity, i.e. leverage). It exposes whether ROE comes from operations or from debt.
Can high ROE be a warning sign?
Yes — when driven by aggressive leverage rather than operations. A 25% ROE from a 5x equity multiplier is a 5% return on assets levered up; the underlying business may be only average. Always check the leverage source.
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Methodology & Review
Return on equity is net income divided by shareholders' equity, multiplied by 100. Use trailing-twelve-month net income against average shareholders' equity for a fair figure. ROE can be artificially inflated by buybacks (which shrink equity) or by high leverage; DuPont analysis separates the contributing forces.
Written by Ugo Candido · Last updated May 17, 2026.