ROE measures how effectively management uses investors’ money. Warren Buffett looks for companies with consistently high ROE (15%+) achieved without excessive debt – which the DuPont analysis helps check.
How to use the Return on Equity Calculator
- Net income
- Shareholders’ equity at the start of the year
- Shareholders’ equity at the end of the year
- Total assets
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter net income, shareholders’ equity at the start and end of the year (or the same figure twice) and total assets.
Tips
- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.
Common mistakes to avoid
- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.
Inputs explained
| Field | What to enter |
|---|---|
| Net income | Amount in your currency |
| Shareholders’ equity at the start of the year | Amount in your currency |
| Shareholders’ equity at the end of the year | Amount in your currency |
| Total assets | Amount in your currency |
What each result means
- Average equity = ([Shareholders’ equity at the start of the year] + [Shareholders’ equity at the end of the year])÷2
- Return on equity (ROE) = [Net income]÷[Average equity]×100
- Return on assets (ROA) = [Net income]÷[Total assets]×100
- Equity multiplier = [Total assets]÷[Average equity]
Example values
How the main result changes when Net income changes and everything else stays at the example values above:
| Net income | Return on equity (ROE) (%) |
|---|---|
| 6,000,000 | 7.5 |
| 9,000,000 | 11.25 |
| 12,000,000 | 15 |
| 15,000,000 | 18.75 |
| 18,000,000 | 22.5 |
| 24,000,000 | 30 |
Formula
ROE = net income ÷ shareholders' equity × 100Average equity = (opening + closing) ÷ 2ROA = net income ÷ total assets; equity multiplier = assets ÷ equityWorked example
Inputs — Net income: $12,000,000; Shareholders' equity at the start of the year: $75,000,000; Shareholders' equity at the end of the year: $85,000,000; Total assets: $200,000,000.
Results — Average equity = $80,000,000.00; Return on equity (ROE) = 15 %; Return on assets (ROA) = 6 %; Equity multiplier = 2.5 ×.
Frequently asked questions
What is a good ROE?
15–20% is generally considered good; it varies by industry.
Can ROE be too high?
Very high ROE may come from heavy debt or very low equity.
Why use average equity?
It matches profit earned during the year with the equity used over the year.
What formula does the Return on Equity Calculator use?
ROE = net income ÷ shareholders' equity × 100.