How hard is shareholders' money working? Enter net income and shareholders' equity to get ROE — and add revenue and total assets to unlock the DuPont breakdown showing whether returns come from margins, efficiency or leverage.
Answer first: return on equity (ROE) is net income divided by shareholders' equity — the profit generated per dollar that belongs to the owners. This ROE calculator computes the headline ratio instantly, and if you also provide revenue and total assets it performs a DuPont analysis, splitting the return into the three levers that produce it.
ROE = Net income ÷ Shareholders' equity × 100
Example: $150M of net income on $1,000M of equity = 15% ROE. Every dollar shareholders have in the business earned 15 cents this year. Both numbers come straight from the annual report: income statement (net income) and balance sheet (total equity).
ROE is the classic "quality" metric because it measures the engine, not the stock: a business that consistently compounds owners' capital at 15–20% is doing something structurally right — pricing power, efficient operations, or both. Warren Buffett has long cited sustained, unleveraged ROE as one of his favorite tests of a franchise. As a rough yardstick, large U.S. companies have historically averaged low-to-mid-teens ROE, so mid-teens is solid and 20%+ sustained for a decade is rare air.
Two companies can both post 15% ROE for completely different reasons, and the DuPont identity exposes it:
ROE = Net margin × Asset turnover × Equity multiplier — profit per dollar of sales, times sales per dollar of assets, times assets per dollar of equity. A luxury-goods maker gets there on fat margins and slow turnover; a discount grocer on razor margins and furious turnover; a bank on modest margins amplified by leverage. Feed the calculator revenue and total assets and it multiplies the three factors back into ROE, so you can see which lever dominates — and which kind of business you're actually analyzing.
Because equity is the denominator, anything that shrinks equity inflates ROE without a single extra dollar of profit. Big share buybacks do it. Heavy borrowing does it — the equity multiplier in the DuPont formula is exactly that leverage showing up in the math. A 25% ROE built on an equity multiplier of 5 is a very different (and riskier) animal than 25% earned nearly debt-free. Cross-check with the debt-to-equity calculator: if D/E is high, discount the ROE accordingly. Also watch for one-time gains in net income and for negative equity, which makes the ratio meaningless.
Three habits keep the number honest. Compare within the industry, never across it — utilities and software live on different planets. Look at five to ten years, not one; durable ROE is the signal, a single hot year is noise. And use average equity (start of year plus end of year, divided by two) when equity changed a lot during the year, which this calculator accommodates by letting you enter any equity figure you choose.
Reality check: ROE is one ratio from one year of accounting statements — it says nothing about valuation (a great business can be a terrible price) and can be distorted by leverage, buybacks and one-offs. Educational calculator only, not financial advice. Company filings are free on the SEC's EDGAR at sec.gov.
Continue the fundamentals toolkit: EPS calculator, P/E ratio calculator, price-to-book calculator (its book value is the same equity you used here), and the primer fundamental analysis basics.
Last updated July 2, 2026 · Written by Mustafa Bilgic. Educational only — not financial advice.
Divide net income by shareholders' equity and multiply by 100. A company earning $150 million on $1 billion of equity has an ROE of 15%. Analysts often use the average of beginning and ending equity for the year to smooth out changes.
Across large U.S. companies, long-run ROE has typically averaged in the low-to-mid teens, so 15%+ sustained over years is generally considered strong and 20%+ excellent. But context matters: compare against the company's own industry, and check whether high ROE comes from genuine profitability or just heavy debt.
DuPont analysis splits ROE into three multiplied parts: net profit margin (profit per dollar of sales), asset turnover (sales per dollar of assets) and the equity multiplier (assets per dollar of equity, i.e. leverage). It reveals whether returns come from pricing power, efficiency or borrowed money.
Yes. Because equity is the denominator, buybacks and heavy debt shrink equity and inflate ROE without improving the business. Negative equity makes the ratio meaningless, and one-off gains can distort net income. Always read ROE alongside debt levels and multi-year trends.