ROE Calculator — Return on Equity Dashboard

In 2026, an equity-research analyst at a London long-only fund compares the ROEs of two European banks: BNP Paribas 11% and HSBC 13%. Before recommending HSBC, she checks the ROA — BNP at 0.9%, HSBC at 0.7%. The dashboard immediately reveals that HSBC's higher ROE comes from MORE leverage, not better operating efficiency. She downgrades her recommendation. This widget makes that diagnostic visible in three seconds.

ROE as a managerial metric dates to F. Donaldson Brown, a Bethlehem Steel engineer who joined DuPont in 1909 and developed the DuPont decomposition in 1914 to compare the profitability of DuPont's many divisions. Brown later applied the same framework at General Motors after DuPont acquired a stake. By 1920 the DuPont method was standard across US corporate finance — making it one of the oldest still-used metrics in business.

The DuPont decomposition ROE = Net Margin × Asset Turnover × Equity Multiplier remains the single most important diagnostic in financial-statement analysis. It separates HOW a firm earns its ROE: pricing power (NM), efficiency (AT), or leverage (EM). Banks sustain high ROE primarily through high EM (~10×); tech firms through high NM (~25%). The widget's ROE-vs-ROA bar comparison makes this immediately visible.

Irving Fisher's 1907 Rate of Interest didn't address ROE directly but established the time-value-of-money framework that connects ROE to firm value: sustained ROE above the cost of equity creates economic profit; ROE below the cost of equity destroys it. Modigliani-Miller's 1958 theorem clarified that capital structure affects ROE but not enterprise value in frictionless markets — a key insight when analyzing leveraged firms.

Harry Markowitz's 1952 portfolio theory and William Sharpe's 1964 CAPM gave ROE its risk benchmark. The cost of equity from CAPM (r = rf + β(rm − rf)) is what ROE must exceed to create value. A 15% ROE in a high-beta industry might still destroy value; a 9% ROE in a low-beta utility might create it. The widget shows ROE; pair with /tools/calculators/financial/wacc to compare against cost of equity.

Warren Buffett popularized ROE as the single most important indicator of management quality in his 1972 letter to shareholders: "Our preference would be to reach this goal [of compounding intrinsic value] by directly owning a diversified group of businesses that generate cash and consistently earn above-average returns on capital. Our second choice is to own parts of similar businesses, attained primarily through purchases of marketable common stocks by our insurance subsidiaries." Buffett targets 15%+ ROE sustained over 10+ years as the threshold of a quality business.

By 2026 FASB ASC 220 (Income Statement) and IFRS IAS 1 (Presentation of Financial Statements) jointly require firms to disclose net income and shareholders equity, making ROE auditable and comparable. The SEC's 10-K filings include both. FINRA equity-research analysts publish ROE for every covered company. Aswath Damodaran's NYU Stern dataset (refreshed each January) publishes industry-by-industry ROE medians — the source for the seven sector presets in this widget. The Federal Reserve's Z.1 Financial Accounts also reports aggregate corporate ROE quarterly, informing monetary-policy decisions.