Return on Equity (ROE) Calculator
Calculate return on equity (ROE) from net income and shareholder equity. See how efficiently a company turns owners' money into profit.
Return on equity
12%
On ₹1,00,00,000 of equity
Equity per ₹100 profit
₹833.33
How much equity supports ₹100 of profit
ROE measures how efficiently a company turns shareholders' money into profit. For an Indian business, ₹12 lakh profit on ₹1 crore of equity means 12% — the return owners earn on their invested capital each year.
Return on Equity (ROE) Calculator on True Calculator gives you an instant, accurate answer with no sign-up and no app install. Calculate return on equity (ROE) from net income and shareholder equity. See how efficiently a company turns owners' money into profit. Every result shows the formula and a worked example so you can verify the calculation yourself, and all values are computed in your own browser — your numbers never leave your device.
Popular uses: roe calculator · return on equity calculator · roe formula
Reviewed by the True Calculator team · Last updated: August 2026
How We Calculate
This calculator uses standard financial formulas verified by our team. All calculations are performed instantly in your browser using JavaScript — no data is sent to any server.
We use RBI-approved formulas and regularly updated bank rates. All rates and standards are sourced from official government and regulatory websites.
When to Use This Calculator
Return on equity is the first number many Indian investors check before buying a stock, because it measures how productively a company uses the money shareholders have entrusted to it. Consistently high ROE — sustainably above the cost of equity — often accompanies durable advantages like strong brands or distribution networks, which is why portfolio managers screen for it. The ratio also drives dividend and buyback decisions, since companies earning high returns on retained capital are better off reinvesting than paying out. For private business owners, ROE shows whether their own capital is working as hard as it could be, and for students of finance it is the anchor of the DuPont analysis that breaks returns into margin, turnover and leverage. Wherever equity capital meets profit, ROE is the report card.
How to Use This Calculator
- Step 1: Enter the company's net income — profit after tax — for the year.
- Step 2: Enter the average shareholder equity for the same period.
- Step 3: Read the ROE percentage, which is the profit earned on every ₹100 of owners' capital.
- Step 4: Check the equity-per-₹100-profit figure to see how much capital supports each ₹100 of earnings.
Worked Example
A Jaipur trading company reported ₹12,00,000 of net income against ₹1,00,00,000 of average shareholder equity. Dividing profit by equity and multiplying by 100 gives an ROE of exactly 12% — for every ₹100 the owners have invested, the business earns ₹12 a year. The calculator also shows ₹833.33 as the equity supporting every ₹100 of profit, because ₹1,00,00,000 of capital backs each ₹1,00,000 of earnings and the same proportion holds at the ₹100 scale.
Tips and Common Mistakes
- •Tip 1: Use average equity — opening plus closing divided by two — to smooth share issues or buybacks during the year.
- •Tip 2: Compare ROE only within the same industry; capital-light businesses naturally show higher ratios.
- •Tip 3: Read ROE alongside ROA — a big gap signals heavy leverage, which raises risk.
- ✗Mistake 1: Judging a single year — one-time gains like land sales inflate net income and the ROE along with it.
- ✗Mistake 2: Entering zero or negative equity, which the calculator correctly rejects since the ratio is undefined.
Frequently Asked Questions
What is a good ROE for an Indian company?
As a rough guide, 15–20% or more is considered strong for Indian blue-chip companies, while below 10% suggests weak use of shareholder funds. Compare ROE with peers in the same industry, since capital-light sectors naturally show higher ROE.
How is ROE different from ROA?
ROE divides profit by shareholder equity only, while ROA divides by total assets including debt. A company with heavy debt can show a high ROE but a modest ROA — the debt magnifies returns for owners but adds risk.
Can ROE be misleading?
Yes. High debt inflates ROE because equity is small, and buybacks shrink the equity base. Also, one-time gains like asset sales boost net income without improving operations, so check ROE over several years before judging a business.
What equity should I enter for an Indian company?
Use the average of opening and closing shareholders' equity for the year, which smooths share issues or buybacks during the period. Standalone financials (not consolidated) give the cleanest view of the parent company's own operations.
Does ROE matter for choosing mutual funds?
Indirectly. Many Indian equity funds tilt towards high-ROE companies because persistent high returns on equity often accompany durable competitive advantages. It is one fundamental screen among many, not a standalone buy signal.
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