# How to Calculate ROE (Return On Equity)?

How do you calculate return On equity (roe) share capital ratio?

## Return On Equity Share Capital Ratio

**ROE** - Stands for **R**eturn **O**n **E**quity. It is defined as the ratio of net income to the average shareholders equity. ROE can also be determined when knowing a firm's dividend growth rate (g) and earnings retention rate (b). Return on equity is measured to determine how much profit a company generates with the money shareholders have invested. Let us learn here how to calculate Return on Equity (ROE) in simple steps using a simple formula.

**Formula For ROE Calculation**

**Return On Equity (ROE) = Net Income / Average Shareholders Equity x 100**

Here the net income is for the full fiscal year. Shareholders equity does not include preferred shares.

**Example**: Assume that the net income of a corporation is $1,722,000 and the average shareholders equity was $15,459,500. Calculate its return on equity.

**Step 1: **Given,

Net income = $1,722,000

Average shareholders equity = $15,459,500

**Step 2:**Applying the values in the formula,

ROE = (Net income / Average Shareholders Equity) x 100

ROE = (1722000 / 15459500) x 100

ROE = 0.11 x 100

ROE = **11%**

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