A ROE above 15% is generally considered strong, though benchmarks vary by industry. Capital-light businesses (software, financial services) often achieve 20–30%+, while capital-intensive sectors (utilities, manufacturing) may target 8–12%.

What does the DuPont decomposition show?

DuPont breaks ROE into three levers: net profit margin (how much of each revenue dollar becomes profit), asset turnover (how efficiently assets generate revenue), and equity multiplier (financial leverage). A high ROE driven primarily by leverage carries more risk than one driven by margin or turnover.

Yes. A negative ROE occurs when a company reports a net loss (negative net income) or when equity is negative due to accumulated losses or share buybacks exceeding retained earnings. Interpret negative ROE carefully — context matters.

How is ROE different from ROA?

ROA (Return on Assets) divides net income by total assets, ignoring how the assets were financed. ROE focuses only on equity capital. The gap between ROE and ROA reflects financial leverage: ROE = ROA × Equity Multiplier.

Should I use beginning or ending equity?

Analysts often use average equity ((beginning + ending) ÷ 2) to smooth seasonal or one-time equity changes. This calculator uses ending equity for simplicity; you can enter the average directly if preferred.

Return on Equity Calculator

Name: Return on Equity Calculator
Availability: InStock
Author: Nham Vu

Compute ROE from net income and equity, then drill into its DuPont components: profit margin, asset turnover, and leverage.

Calculation Mode

Net Income ($)

Shareholders' Equity ($)

Enter values and click Calculate ROE to see results.

Return on Equity (ROE)

— %

Basic Formula

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Net Income

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Equity

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ROE

Benchmark Guide

Below 5% — weak; may signal operational or structural issues

5–14% — average; acceptable in capital-intensive industries

15–25% — strong; typical of well-run public companies

Above 25% — exceptional; common in software or asset-light firms

Summary

Compute ROE from net income and equity, then drill into its DuPont components: profit margin, asset turnover, and leverage.

How it works

Enter net income and total shareholders' equity for a quick ROE result.
Switch to DuPont mode to enter net income, revenue, total assets, and equity separately.
The calculator computes net profit margin (Net Income ÷ Revenue), asset turnover (Revenue ÷ Total Assets), and equity multiplier (Total Assets ÷ Equity).
Multiply the three DuPont components to verify they equal the overall ROE.
Use the results to benchmark against industry averages or compare year-over-year performance.

Use cases

Evaluate how effectively a company is using equity capital to generate profit.
Compare ROE across companies in the same sector during investment analysis.
Identify whether high ROE comes from strong margins, efficient asset use, or high leverage.
Track ROE improvement after cost-cutting or capital structure changes.
Prepare financial analysis reports and equity research summaries.
Assess management effectiveness as part of a due diligence checklist.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu