How to use this calculator
- Enter net income, average positive equity.
- Choose a display currency, then select Calculate. Results also update after a brief pause while you edit.
- Read the result with the assumptions below. Export details or save a second scenario to compare your choices.
Formula and method
Assumptions and limitations
Use figures for the same entity, currency and reporting period. The denominator must be positive. This ratio is descriptive and has no universal pass/fail threshold.
Worked example
With net income = 20000, average positive equity = 100000, return on equity is approximately 20%.
What the result means
Leverage can increase ROE while increasing risk. Negative income yields a negative return.
Common questions
How should I interpret return on equity?
Leverage can increase ROE while increasing risk. Negative income yields a negative return.
What should I check before using this result?
Use figures for the same entity, currency and reporting period. The denominator must be positive. This ratio is descriptive and has no universal pass/fail threshold.
Methodology and transparency
Calculation specification reviewed on 2026-10-14. Mathematical implementation is tested against independent reference fixtures. This does not imply review by a licensed financial professional. Read the testing and precision policy.
Background reference: openstax.org — financial method. FinanceMath implements its own calculator.