ROE Return on Equity
- Created by
- Renato Passos, Eng. de Software
- Reviewed by
- Renato Passos, Eng. de Software
Last updated: Apr 18, 2026
About this calculator
The ROE (Return on Equity) calculator is a financial tool that measures a company's ability to generate profit relative to shareholders' equity. The calculation divides net income by shareholders' equity (SE). This metric helps evaluate how efficiently a company uses its equity to generate returns, making it essential for comparing businesses within the same industry.
To use the calculator, input the net income (from the Income Statement) and total shareholders' equity (from the Balance Sheet). ROE is automatically calculated as a percentage. For example, if a business earns a net income of R$ 500,000 and has equity of R$ 2,000,000, the ROE would be 25%. This means every real invested by shareholders generates 25 cents in annual profit.
This metric is particularly useful for investors analyzing a company's financial health or benchmarking against competitors. However, interpret ROE cautiously: extremely high values may indicate excessive debt (leverage), while low values could signal operational inefficiency. In industries with limited capital, ROE might be misleading, requiring complementary analysis with metrics like ROA (Return on Assets).
Frequently asked questions
Is ROE the same as ROI?
No. ROE (Return on Equity) measures profitability relative to shareholders' equity, while ROI (Return on Investment) evaluates returns on a specific investment. ROE focuses on a company's capital structure.
How does debt affect ROE?
High debt can increase ROE if it generates profits higher than the cost of capital, but it raises financial risk. ROE does not account for debt directly, focusing only on equity.
What is considered a good ROE?
It depends on the industry. Generally, ROE above 15% is positive, but tech companies may exceed 20%, while cyclical sectors might have lower values.
Should I use annual or quarterly financials?
Annual reports are recommended for consistent comparisons, but the calculator accepts quarterly data. Specify the period in your final analysis.