Return on Equity (ROE) Calculator

Calculate ROE with DuPont decomposition. Compare to S&P 500 average.
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Return on Equity

20.0%

Excellent

S&P 500 Average

15-18%

ROE Details

Net Income$500,000.00
Shareholders' Equity$2,500,000.00
ROE (Net Income / Equity)20.00%
RatingExcellent

Use the Return on Equity (ROE) Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

Uncover the true profitability power of a company with our ROE Calculator, featuring DuPont decomposition to reveal the underlying drivers. This isn't just about a single number; it's about understanding if your investments, like a hypothetical tech giant generating an average 20% ROE in 2026, are efficiently using shareholder capital to generate profits compared to the broader market.

Our calculator employs the DuPont Analysis, breaking down Return on Equity (ROE) into three key components: Net Profit Margin (Net Income/Sales), Asset Turnover (Sales/Average Total Assets), and Financial Leverage (Average Total Assets/Average Shareholder Equity). This multiplicative relationship (ROE = NPM * AT * FL) provides a granular view of profitability, asset utilization, and debt financing efficiency.

Remember, a high ROE isn't always a good sign; excessive financial leverage can artificially inflate ROE and increase risk. Always compare a company's ROE to its industry peers and its historical performance, not just the S&P 500 average (projected around 14.5% for 2026), to gain meaningful insights. Avoid companies with consistently declining ROE unless a clear turnaround strategy is in place.

Example: Analyzing 'FutureTech Inc.'s' 2026 Performance

  1. 1 Input the following 2026 financial data for FutureTech Inc.: Net Income = $120 million, Sales = $800 million, Average Total Assets = $500 million, Average Shareholder Equity = $300 million.
  2. 2 Calculate the DuPont components: Net Profit Margin = $120M / $800M = 0.15 (15%). Asset Turnover = $800M / $500M = 1.6. Financial Leverage = $500M / $300M = 1.67.
  3. 3 Multiply the components: ROE = 0.15 * 1.6 * 1.67.
  4. 4 FutureTech Inc.'s ROE for 2026 is approximately 40.08%. This is significantly higher than the projected S&P 500 average of 14.5%, suggesting strong profitability, efficient asset utilization, and potentially effective use of leverage.

Source: SEC · Last updated: April 2026

Frequently Asked Questions

What is a good return on equity?
An ROE of 15-20% is considered good for most industries. The S&P 500 average ROE has been around 17-20% in recent years. Compare ROE within the same industry since capital structures vary significantly.
How is ROE calculated?
ROE equals net income divided by average shareholders equity, expressed as a percentage. The DuPont decomposition breaks ROE into three components: profit margin times asset turnover times financial leverage.
Why can a high ROE be misleading?
High ROE can result from excessive debt (high leverage) rather than operational efficiency. A company with low equity due to heavy borrowing will show a high ROE even with modest profits. Always check the debt-to-equity ratio alongside ROE.

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