# Return on Equity Calculator

## About Return on Equity Calculator (Formula)

A “Return on Equity (ROE) Calculator” is a tool used to determine the return on equity for a company, which measures the profitability of a company’s operations relative to its shareholders’ equity. Return on Equity is a key financial ratio that indicates how efficiently a company is using its equity capital to generate profits. This calculator is crucial for investors, analysts, and financial professionals to assess a company’s financial performance and growth potential. The formula for calculating return on equity provides insights into the relationship between net income and shareholders’ equity.

The formula for calculating Return on Equity (ROE) is:

ROE = (Net Income) / (Shareholders’ Equity) * 100

Where:

• ROE is the Return on Equity, expressed as a percentage.
• Net Income is the company’s net profit after taxes and other expenses.
• Shareholders’ Equity is the residual interest in the assets of the company after deducting liabilities.

This formula calculates the percentage of net income generated for each unit of shareholders’ equity.

For example, if a company’s net income is \$1 million and its shareholders’ equity is \$10 million, the return on equity would be:

ROE = (\$1 million) / (\$10 million) * 100 = 10%

This means that for every dollar of shareholders’ equity, the company generates a return of 10 cents in net income.

The Return on Equity Calculator is used by investors, financial analysts, and company stakeholders to evaluate a company’s profitability and efficiency in utilizing shareholders’ capital.