Return on Equity (ROE)
$
$
Return on Equity (ROE) measures how efficiently a company generates profit from shareholders' equity. It shows how much net income is produced for every pound or dollar of equity invested. ROE = Net income / Shareholders' equity.
💡
Tip: High ROE achieved through high debt (leverage) is misleading. Always check the debt/equity ratio alongside ROE to ensure returns stem from business quality, not borrowed money.
- 1Find net income from the income statement
- 2Find average shareholders' equity: (start + end equity) / 2
- 3ROE (%) = (Net income / Average equity) × 100
- 4Decompose using DuPont analysis: ROE = Profit margin × Asset turnover × Equity multiplier
Net income $50k · Average equity $250k=ROE = 20%Returns $0.20 for every $1 of equity
| Sector | Typical ROE |
|---|---|
| Technology (software) | 25–40% |
| Banking | 10–15% |
| Consumer staples | 15–25% |
| Utilities | 8–12% |
| Energy | 8–15% |
⭐
Fun Fact
Warren Buffett uses ROE as a primary filter — he looks for companies consistently achieving 15%+ ROE without excessive debt, which he views as a sign of durable competitive advantage.
🔒
100% Gratis
Sin registro
✓
Preciso
Fórmulas verificadas
⚡
Instantáneo
Resultados al instante
📱
Compatible móvil
Todos los dispositivos