This ratio measures the rate of return that shareholders receive on their investment in a business. The ROE is also a good indicator of how effective a management team is at using equity to fund operations and accelerate growth.
A Return on Equity (ROE) calculator helps you find out how much profit a company makes from its shareholders' money. It is an important ratio used by investors to see if a business is making good use of its resources.
With this calculator, you can quickly figure out the ROE either using an ROE calculator online or by using Excel. ROE shows you how much return the company is giving back to its investors based on the amount of equity they put in. A higher ROE means better performance.
You can easily calculate ROE with these steps:
You can also use Excel to do the same thing. Here’s the formula:
Formula for ROE: | |
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ROE = | Net Income ÷ Shareholder’s Equity |
Once you get the ROE result, here’s what it means:
Compare the ROE with other companies in the same industry to get a better idea. Usually, a higher ROE is a positive sign but always check against similar businesses.
After using the Return on Equity Calculator, these tools can further help you understand your business’s financial health: