Return on equity calculator
Calculate ROE from period net income and average beginning and ending equity.
Formula
Average equity = (opening + closing equity)/2; ROE = net income / average equity × 100.
Average total equity ≈ ((100,000)+(150,000))÷2 · Return on equity ≈ (20,000)÷(125,000)×100
How to use
- Enter net income for one reporting period.
- Enter positive opening and closing total equity in the same currency.
- Read average equity and ROE for that period.
Examples
- Net income 30, opening equity 100, closing 200: average 150 and ROE 20%.
Frequently asked questions
Why average the equity?
Income spans a period; the two-point average approximates equity available during it.
Can ROE be negative?
Yes, a net loss gives negative ROE when equity is positive.
What about negative equity or preferred shares?
This tool requires positive total equity and total net income; it does not calculate common-share ROE separately.
Sources
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