📈 Return on Equity Calculator
Calculate ROE from net income and shareholders equity using the DuPont formula.
ROE and the DuPont Formula
ROE = Net Income ÷ Shareholders Equity. The DuPont formula breaks ROE into three components: ROE = Net Profit Margin × Asset Turnover × Financial Leverage. This decomposition reveals the source of ROE — whether it comes from strong margins, efficient asset use, or debt leverage. High ROE from high margins is more sustainable than high ROE from excessive leverage.
People Also Ask
Technology companies: 15–30%+. Consumer goods: 15–25%. Banking: 10–15%. Utilities: 8–12%. The S&P 500 average ROE is approximately 15%. An ROE consistently above 15% suggests a competitive advantage (Warren Buffett's key screening criterion). Anything above 20% is excellent if not driven by excessive debt.
Yes — ROE above 30–40% may indicate excessive debt (financial leverage artificially inflating ROE) or share buybacks reducing equity base. Always check the DuPont components to understand whether high ROE comes from genuine operational excellence or financial engineering.