Divide net income by equity to see how efficiently the business turns owners' capital into profit — plus return on assets for context.
ROE = net income ÷ shareholder equity. It measures how much profit each dollar of owners' capital generates. Very high ROE can come from strong performance OR heavy debt (which shrinks equity), so read it alongside debt-to-equity. General information only.
Return on equity tells owners and investors how hard their invested capital is working: 15% ROE means the business earns 15 cents of profit a year for every dollar of equity. It's a headline profitability metric — but a high ROE driven by heavy borrowing carries more risk than one driven by strong margins.
ROE = net income ÷ shareholder equity
Often cited as 15%+, but it varies by industry. Compare a company to its peers and its own history rather than a universal number.
Return on assets ignores how the business is financed, so comparing ROE and ROA shows how much of the return comes from leverage versus operations.
Related: debt-to-equity calculator · profit margin calculator · ROI calculator · all free calculators.
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