Return on Equity (ROE) Calculator

Calculate and analyze your company's Return on Equity (ROE) over time.

Current Year: 2024
Historical Data (Optional)

ROE Analysis

Current ROE

20.00%

Historical Average ROE

19.01%

Understanding Return on Equity (ROE)

Return on Equity (ROE) is a key financial metric that measures a company's profitability in relation to its shareholders' equity. It indicates how effectively a company is using its shareholders' investments to generate profits.

How to Calculate ROE

The formula for calculating ROE is:

ROE = (Net Income / Shareholders' Equity) × 100%

Interpreting ROE

  • High ROE: Generally, a higher ROE is better, as it indicates that a company is more efficient at generating profits from its equity.
  • Industry Comparison: It's important to compare a company's ROE to others in the same industry, as ROE can vary significantly between sectors.
  • Sustainable Growth: A consistently high ROE over time often indicates a company with a sustainable competitive advantage.

Limitations of ROE

  • Debt Impact: High debt levels can artificially inflate ROE without necessarily improving the company's financial health.
  • Short-term Focus: A high ROE might result from short-term strategies that aren't sustainable in the long run.
  • Accounting Practices: Different accounting methods can affect ROE calculations, making comparisons between companies less straightforward.