ROE / ROA Calculator

ROE and ROA: profitability ratios

ROE (Return on Equity) measures the return generated for shareholders: ROE = net income / shareholders' equity · 100%. ROA (Return on Assets) measures how efficiently the company uses its asset base: ROA = net income / total assets · 100%. The DuPont decomposition breaks ROE into three drivers: ROE = net margin · asset turnover · leverage, exposing whether returns come from operations, efficiency, or debt. Example: net income R$ 500k, equity R$ 2M, assets R$ 5M gives ROE 25% and ROA 10% — the gap reveals financial leverage.

Applications and benchmarks

Core metrics in fundamental analysis, valuation, equity investing decisions, sector comparison, and corporate performance management. Benchmarks: Brazilian banks typically post ROE of 15–25% (Itaú and Banco do Brasil around 20%); retail 10–15%; big tech is higher (Google ~25%). ROA: banks ~1–2% (highly leveraged), tech 10–20%. A high ROE achieved with heavy leverage can mask risk — always inspect debt-to-equity together.

FAQ

Why is ROE higher than ROA? Because equity is smaller than total assets when the firm uses debt. The bigger the gap, the more leveraged the company.

Is a very high ROE always good? Not necessarily — it can come from excessive leverage or one-off gains. Check DuPont and the debt level.

Can ROE be negative? Yes, when net income is negative. Persistent negative ROE signals capital destruction.