Enter net income and shareholders' equity to calculate return on equity.
How to Use the Return on Equity Calculator
Enter net income and ending equity at minimum; add a beginning equity figure too and the calculator averages the two instead of dividing into the ending balance alone.
Return on equity measures how much profit a company generates for every dollar shareholders have invested — one of the most-quoted profitability metrics precisely because it ties earnings directly back to ownership stake rather than to revenue or assets.
Average Equity = (Beginning Equity + Ending Equity) ÷ 2 [if beginning equity is entered]
ROE = Net Income ÷ Average Equity × 100Using an average rather than a single point-in-time equity figure matters more than it might seem. Equity moves throughout the year — buybacks shrink it, retained earnings grow it — so dividing net income by only the year-end number can overstate or understate ROE depending on which direction equity moved. Leave beginning equity blank and the calculator falls back to ending equity alone, which is the simpler (if less precise) version most casual comparisons use.
A high ROE isn't automatically a sign of a well-run company — it can also come from heavy debt shrinking the equity base rather than from genuinely efficient operations, since a smaller denominator inflates the ratio just as effectively as a larger numerator would. Pairing this figure with a debt-to-equity check is the usual way analysts catch that distinction.