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.
Last updated: August 2026
How this calculator is verified
Checked by True Calculator automated test suite on
- Formula verified against a published worked example in the automated test suite
- Edge cases (zero, negative, boundary and unit-mismatch inputs) covered by unit tests
The full verification method is on our how we verify page. Found an error? Tell us and we will re-check it.
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.
Compare these tools
- Future Value Calculator — Find what your money grows into with compound interest at any frequency
- Gratuity Calculator (India) — Calculate gratuity under the Payment of Gratuity Act, 1972 with the 15/26 formula and the ₹20 lakh tax-exempt cap for Indian employees
- GST Calculator (India) — Add or remove GST from any amount, with CGST + SGST split for intra-state and IGST for inter-state supplies
You might also need
Related calculators from other categories
Science & Weather
Acceleration Calculator
Calculate acceleration from initial and final velocity over time, plus the distance covered. Handles speeding up and braking.
Health & Fitness
Army Body Fat Calculator
Estimate body fat percentage with the US Army circumference formula using neck and waist measurements. See your category instantly.
Health & Fitness
Body Fat Calculator
Estimate body fat percentage with the US Navy method using tape measurements. Track your fitness progress accurately for men and women.
Health & Fitness
Body Surface Area Calculator
Calculate body surface area in m² with Mosteller, DuBois and Haycock formulas — used in medicine and dosage calculations.