{
  "id": "roe",
  "version": "2a759b6c918c",
  "status": "published",
  "name": "ROE Calculator",
  "question": "What is my ROE?",
  "summary": "Computes return on equity (ROE): net income minus preferred dividends, divided by average stockholders’ equity, as a percent.",
  "category": "finance",
  "subcategory": "business",
  "url": "https://www.acalculator.org/finance/roe-calculator",
  "markdown": "https://www.acalculator.org/finance/roe-calculator.md",
  "kind": "function",
  "method": "Earnings = net income − preferred dividends. Average equity = (beginning equity + ending equity) ÷ 2 (ending equity alone when no beginning is given). ROE = earnings ÷ average equity × 100.",
  "assumptions": [
    "Net income and preferred dividends cover the same year as the two balance sheets.",
    "Equity is total stockholders’ equity and must be more than $0.",
    "Arithmetic is exact on the typed decimals; ROE shows to 2 decimals, halves up."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "ni": {
        "title": "Net income",
        "description": "Profit for the year after every expense, interest and tax. Negative for a loss.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      },
      "pref": {
        "title": "Preferred dividends",
        "description": "Dividends paid to preferred stockholders for the year, taken off net income. Optional.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "beq": {
        "title": "Equity at the start of the year",
        "description": "Total stockholders’ equity on last year’s balance sheet. Leave empty to use the ending equity alone.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000000
      },
      "eeq": {
        "title": "Equity at the end of the year",
        "description": "Total stockholders’ equity on this year’s balance sheet.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000000000
      }
    }
  },
  "outputs": {
    "roe": {
      "label": "Return on equity (ROE)",
      "description": "(Net income − preferred dividends) ÷ average equity × 100.",
      "format": "percent"
    },
    "earnings": {
      "label": "Earnings to common stockholders",
      "description": "Net income minus preferred dividends.",
      "format": "money"
    },
    "average": {
      "label": "Average equity",
      "description": "(Beginning equity + ending equity) ÷ 2, or the ending equity when no beginning is given.",
      "format": "money"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "ni": 35000,
      "pref": 5000,
      "beq": 90000,
      "eeq": 100000
    },
    "outputs": {
      "roe": 31.57894736842105,
      "earnings": 30000,
      "average": 95000
    },
    "text": "Net income of $35,000.00, less any preferred dividends, on average equity of $95,000.00 gives a return on equity of 31.58%."
  },
  "examples": [
    {
      "given": {
        "ni": 35000,
        "pref": 5000,
        "beq": 90000,
        "eeq": 100000
      },
      "expect": {
        "roe": 31.57894736842105,
        "earnings": 30000,
        "average": 95000
      },
      "source": "OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method (ROE = net income ÷ average stockholder equity; Clear Lake Sporting Goods). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method: (35,000 − 5,000) ÷ ((90,000 + 100,000) ÷ 2) = 0.32 (rounded); exact value 600/19 = 31.578947…% (Python Fraction)"
    },
    {
      "given": {
        "ni": 35000,
        "beq": 90000,
        "eeq": 100000
      },
      "expect": {
        "roe": 36.8421052631579
      },
      "source": "OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method (ROE = net income ÷ average stockholder equity; Clear Lake Sporting Goods). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method; hand calculation in content.mdx: 35,000 ÷ 95,000 × 100 = 700/19 = 36.842105…%"
    },
    {
      "given": {
        "ni": 35000,
        "eeq": 100000
      },
      "expect": {
        "roe": 35,
        "average": 100000
      },
      "source": "hand calculation in content.mdx: 35,000 ÷ 100,000 × 100 = 35%"
    },
    {
      "given": {
        "ni": -12500,
        "beq": 240000,
        "eeq": 260000
      },
      "expect": {
        "roe": -5
      },
      "source": "hand calculation in content.mdx: −12,500 ÷ ((240,000 + 260,000) ÷ 2) × 100 = −5%"
    }
  ],
  "sources": [
    "OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method: return on equity = net income ÷ average stockholder equity, average = (beginning + ending) ÷ 2, and the Clear Lake Sporting Goods example with $5,000 of preferred dividends taken off net income (0.32, rounded). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method (retrieved 2026-10-18)",
    "U.S. Securities and Exchange Commission, Beginners' Guide to Financial Statements: shareholders' equity is what the owners invested plus or minus the company's earnings or losses since inception. https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements (retrieved 2026-10-18)"
  ],
  "related": [
    "eps",
    "debt-to-equity",
    "asset-turnover",
    "roi"
  ],
  "changelog": []
}