Return on Equity Calculator

Return on equity measures the return on the shareholders investment in the business.

Definition Return on equity equals net income divided by total stockholders equity.
Net income is the profit of a business after tax.
Stockholders equity is the total of retained earnings plus capital.
Return on Equity Calculator
Net income after tax $
Retained earnings $
Capital $
Return on equity

Working with your return on equity

Return on equity is another common measure of performance. It represents what the owners earned based on their past cumulative investments (initial investment plus what they left in the business). It also has some "historical" issues because the denominator does not necessarily reflect the current value of the business. Return on equity represents the return on existing stockholders investment and not necessarily the return that a new shareholder would receive on the purchase of the business.

By monitoring changes in your return on equity over time, you can better understand the financial dynamics of your business, identify trends and run the business more effectively. Here is a worksheet you can use to track changes in this and other important measures.