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Finance Calc Kit
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Return on Equity Calculator

Calculate Return on Equity (ROE), DuPont 3-step analysis, net profit margin, and financial leverage ratio.

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Return on equity (ROE)

20.00%

$500,000.00 net income on $2,500,000.00 equity

DuPont 3-step analysis

Net profit margin
25.00%
Asset turnover
0.40x
Equity multiplier (leverage)
2.00x
DuPont ROE (margin × turnover × leverage)
20.00%

Net income

$500,000.00

Shareholder equity

$2,500,000.00

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What is return on equity (ROE)?

Return on equity measures how much profit a company generates for each dollar of shareholder equity. Investors use ROE to judge whether management is deploying capital efficiently and creating value for owners.

Compare ROE with return on assets (ROA) and return on capital employed (ROCE) to see whether high returns come from operations or from financial leverage.

ROE formula

ROE=Net IncomeShareholder Equity×100%\text{ROE} = \frac{\text{Net Income}}{\text{Shareholder Equity}} \times 100\%

DuPont 3-step analysis

ROE=Net Profit Margin×Asset Turnover×Equity Multiplier\text{ROE} = \text{Net Profit Margin} \times \text{Asset Turnover} \times \text{Equity Multiplier}

Net profit margin equals net income divided by revenue. Asset turnover equals revenue divided by total assets. The equity multiplier equals total assets divided by shareholder equity. Together they show whether ROE is driven by pricing power, operational efficiency, or debt leverage.

Worked example

With net income of $500,000 and shareholder equity of $2,500,000, ROE equals 20%. If revenue is $2,000,000 and total assets are $5,000,000, net profit margin is 25%, asset turnover is 0.40x, and the equity multiplier is 2.00x. DuPont ROE equals 25% × 0.40 × 2.00 = 20%. Combine ROE with dividend policy in the sustainable growth rate calculator to estimate maximum growth without new equity.

Frequently asked questions

What is considered a good ROE?
Many analysts view 15% to 20% as strong for mature public companies, but benchmarks vary widely by industry. Compare ROE to direct competitors rather than the broad market.
Can ROE be negative?
Yes. A net loss produces negative ROE. Negative shareholder equity from accumulated losses can also distort the ratio and should be interpreted with caution.
How does debt affect ROE?
Higher debt increases the equity multiplier, which can raise ROE even when profit margin and asset turnover stay flat. Always check leverage alongside ROE.
Why include revenue and total assets?
Revenue and total assets unlock the DuPont breakdown. Without them you still get ROE, but you cannot see which driver dominates performance.
Can I share my inputs?
Yes. Changing fields updates the page URL for easy sharing.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.