Return on Equity (ROE) Formula
ROE measures how efficiently a company uses shareholders' money to generate profit. It's a key metric for evaluating management effectiveness.
Return on Equity
ROE = (Net Income / Shareholder's Equity) × 100
Where:
- Net Income = Annual profit after all expenses and taxes
- Equity = Total shareholders' equity
Step-by-Step:
- 1
Find net income
From the income statement (bottom line).
- 2
Find shareholders' equity
From the balance sheet.
- 3
Divide and convert
(Net Income / Equity) × 100.
Worked Examples:
Company ROE
Net Income: ₹15CrEquity: ₹100Cr
Result: 15%
ROE = (15/100) × 100 = 15%