Return on Equity (ROE) Calculator

Profitability
Updated Oct 2026 • Has calculator

Measures how much profit a company generates per dollar of shareholders' equity.

Calculate ROE

ROE Formula

ROE = (Net Income ÷ Shareholders’ Equity) × 100

Annual net income (USD millions)

Total stockholders’ equity at year-end (USD millions)

Return on Equity

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Not investment advice.

What is ROE?

Return on equity (ROE) divides net income by average shareholders' equity to show how efficiently management is generating profit from the capital shareholders have invested. A high ROE indicates strong profitability relative to book value, but it can be inflated by heavy debt or share buybacks that reduce equity — making it essential to examine ROE alongside the debt-to-equity ratio. Warren Buffett has long cited consistently high ROE as a hallmark of companies with durable competitive advantages.

Worked Example

Worked example — Microsoft Corporation (MSFT)

FY2024 (year ended June 30, 2024)

Step 1  Net income: $88,136M
Step 2  Total stockholders’ equity: $268,477M
Step 3  ROE = $88,136M ÷ $268,477M × 100 = 32.83%
Step 4  → Microsoft generated $0.33 of profit for every $1 of equity

Source: Microsoft Annual Report FY2024 (2024-07-30)

How to Interpret ROE

< 10
Weak — below the typical cost of equity
10 – 15
Average — around the typical cost of equity
15 – 20
Strong — above-average capital efficiency
> 20
Exceptional — high-return business model

📚 Profitability Metrics — Complete the path

  1. Gross Margin
  2. Operating Margin
  3. EBITDA Margin
  4. Net Margin
  5. ROE
Sources
  1. Microsoft Corporation — Investor Relations
  2. CFA Institute — Financial Reporting and Analysis, 6th ed.
  3. Damodaran, A. — Investment Valuation, 3rd ed.