Return On Equity Calculator

Return on equity roe is a ratio that provides investors with insight into how efficiently a company or more specifically its management team is handling the money that shareholders have.

Return on equity calculator. The denominator of the return on equity formula average stockholder s equity can be found on a company s balance sheet. Tammy would calculate her return on common equity like this. This means that the company earned a 160 percent profit on every dollar invested by shareholders. To calculate return on equity divide net profits by the shareholders average equity.

This means that every dollar of common shareholder s equity earned about 1 80 this year. To get a percentage result simply multiply the ratio by 100. Definitions and terms used in return on equity calculator net income the income that a company has after subtracting costs and expenses from the total revenue. Return on equity definition return on equity roe is equal to a fiscal year s net income after preferred stock dividends but before common stock dividends divided by total equity excluding preferred shares expressed as a percentage.

Net income is also called profit. The formula for roe used in our return on equity calculator is simple. For example if your net profits are 100 000 and the shareholders average equity is 62 500 your return on equity is 1 6 or 160 percent. In other words shareholders saw a 180 percent return on their investment.

Both input values are in the relevant currency while the result is a ratio. Roe net income total equity. As you can see after preferred dividends are removed from net income tammy s roe is 1 8. For example if an investor is.

When calculating the return on equity the stockholder s equity should be averaged based on the time being evaluated.