Quick answer
Return on equity (ROE) = net income ÷ average shareholders' equity × 100. $120,000 of net income on average equity of $850,000 (start $800,000, end $900,000) is 14.12%.
Enter net income and equity at the start and end of the period. The calculator returns ROE.
Related tools: Accounts Payable Days Calculator: Days payable outstanding. Accounts Receivable Days Calculator: Days sales outstanding. Cash Conversion Cycle Calculator: Days to turn inventory into cash.
How to use the Return on Equity Calculator
- Enter net income ($).
- Enter equity at start ($) (above 0).
- Enter equity at end ($) (above 0).
- Press Calculate to see the result, and use Reset to start again.
| Input | What to enter | Allowed values |
|---|---|---|
| Net income | A number, in $ | — |
| Equity at start | A number, in $ | > 0 |
| Equity at end | A number, in $ | > 0 |
Formula and method
Formula
ROE = net income ÷ average equity × 100
IEEE-754 double precision; shown to the decimals indicated.
Average equity is the mean of the opening and closing balances.
Worked examples
These examples are verified: each one is an automated test case that the live calculator must reproduce exactly.
Example 1
Inputs: Net income = 120000; Equity at start = 800000; Equity at end = 900000.
| Result | Value |
|---|---|
| Return on equity | 14.12% |
Example 2
Inputs: Net income = 45000; Equity at start = 300000; Equity at end = 330000.
| Result | Value |
|---|---|
| Return on equity | 14.29% |
The first line is the headline result (return on equity). IEEE-754 double precision; shown to the decimals indicated.
Why average equity
Equity changes during the year, so using the mean of the opening and closing balances matches income earned over the period. Using only ending equity would give 13.33%.
Cautions
ROE can be inflated by debt or by buybacks that shrink equity, so check leverage as well. Negative equity is not supported, since the ratio becomes meaningless. Compare with peers.
How the result changes with net income
Holding every other input at the first worked example, this table changes only net income. It shows how sensitive the answer is to that one value; each row was produced by running this calculator.
| Net income | Return on equity |
|---|---|
| 60000 | 7.06% |
| 120000 | 14.12% |
| 240000 | 28.24% |
| 480000 | 56.47% |
What happens with invalid input
These messages are produced by the calculator itself, so you know what to fix.
- Equity at start: entering "0" shows "Equity at start must be greater than 0." beside that field and no result.
- Net income: left empty shows "Enter net income." beside that field and no result.
Choosing between the Return on Equity Calculator and similar calculators
Each row shows what a related calculator on this site asks for and what it returns, so you can pick the one that matches your question.
| Calculator | You enter | It returns |
|---|---|---|
| [Accounts Payable Days Calculator](/business/accounts-payable-days-calculator/) | accounts payable, cost of goods sold and days in period | Days payable |
| [Accounts Receivable Days Calculator](/business/accounts-receivable-days-calculator/) | accounts receivable, revenue and days in period | Days sales outstanding |
| [Cash Conversion Cycle Calculator](/business/cash-conversion-cycle-calculator/) | days inventory outstanding, days sales outstanding and days payable outstanding | Cash conversion cycle |
| [Current Ratio Calculator](/business/current-ratio-calculator/) | current assets and current liabilities | Current ratio |
| [Employee Turnover Calculator](/business/employee-turnover-calculator/) | separations and average number of employees | Turnover rate |
Background: business metrics
Business ratios depend on exactly which costs and revenues you include, so read each page's definition. Two common checks: break-even units = fixed costs ÷ (price − variable cost per unit), so $50,000 of fixed costs with a $10 price and $5 variable cost breaks even at 10,000 units; and net profit margin = net profit ÷ revenue, so $20,000 profit on $100,000 revenue is 20%.
Return on investment ignores time: 20% over five years is far less impressive than 20% in one, so compare returns over the same period.
Assumptions and limitations
- Negative equity is not supported
If a required value is empty, not a number, or outside its allowed range, the form marks that field with a message and shows no result instead of a misleading number. The automated checks deliberately try invalid entries for equity at start and net income to confirm this.
Frequently asked questions
What is a good ROE?
Often 10 to 20% is considered healthy, depending on the industry.
How is it different from ROA?
ROA divides by total assets.
Does high ROE mean a good business?
Not necessarily if driven by heavy debt.
What does the Return on Equity Calculator calculate?
Net income relative to average shareholders' equity. It returns Return on equity.
What formula does the Return on Equity Calculator use?
ROE = net income ÷ average equity × 100. Average equity is the mean of the opening and closing balances.
What do I need to enter in the return on Equity Calculator?
You enter Net income ($), Equity at start ($) and Equity at end ($).
How is the result rounded or limited?
IEEE-754 double precision; shown to the decimals indicated. Negative equity is not supported.
What is an example of a return on Equity result?
With net income 120000, equity at start 800000 and equity at end 900000, the return on equity is 14.12%.
Where does the method come from?
The method follows: OpenStax, Principles of Accounting, Volume 1: Financial Accounting (Rice University): profitability ratios (return on equity).
Related calculators
- Accounts Payable Days Calculator — Days payable outstanding.
- Accounts Receivable Days Calculator — Days sales outstanding.
- Cash Conversion Cycle Calculator — Days to turn inventory into cash.
- Current Ratio Calculator — Current ratio from current assets and current liabilities.
- Employee Turnover Calculator — Turnover rate from separations and average number of employees.
- Market Share Calculator — Market share from your sales and total market sales.
Sources
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (Rice University): profitability ratios (return on equity)
Content last reviewed 2026-11-04. Formulas and worked examples are checked by automated tests against independently computed values.