ROE Calculator

ROE Calculator

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  • How is Return on Equity Calculated?

    What is ROE?

    ROE is short for return on equity. Turkish is the return on equity. ROE is a popular and important indicator of how efficient the business is. In the simplest terms, ROE is the rate of profitability that shows how much profit the company has made from its equity. In other words, the company's ability to make a profit with the money invested by shareholders.

    How is ROE Calculated?

    ROE can be calculated with two variables.
    1. Net earnings,
    2. Equity. It can be calculated with the formula of
    ROE = (Net Profit / Equity) x 100%. It is expressed in% in the figure found.
    For example, the ROE value for a business with a net profit of $ 34,500 and a equity of $ 456,000;
    ROE = $ 34,500 / $ 456,000 = 7.57%.

    How to interpret ROE?

    After calculating the ROE value, we need to learn what a good return on equity is. Considering logically, the more money earned from the deposited money, the more logical investment will be in any case. The higher the ROE 'value, the better indicator it will be. Of course, it is very difficult for businesses to raise the ROE rate and keep it high. ROCE is a rate that evaluates all obligations in addition to ROE. In this way, it is more useful when it is desired to analyze a business with long term debts.