Return on Equity (ROE) Calculator

Formula

The formula to calculate ROE is:

\[ \text{ROE} = (\text{OPM} \times \text{ATO}) - (\text{IER} \times \text{EM} \times \text{TR}) \]

Where:

\(\text{OPM}\) is the Operating Profit Margin.
\(\text{ATO}\) is the Asset Turnover.
\(\text{IER}\) is the Interest Expense Rate.
\(\text{EM}\) is the Equity Multiplier.
\(\text{TR}\) is the Tax Retention.

ROE Definition

Return on Equity (ROE) is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders' equity.

How to calculate ROE

Let's assume the following values:

Operating Profit Margin (OPM) = 15%
Asset Turnover (ATO) = 6%
Interest Expense Rate (IER) = 5%
Equity Multiplier (EM) = 2
Tax Retention (TR) = 7%

Using the formula:

\[ \text{ROE} = (15 \times 6) - (5 \times 2 \times 7) \]

Evaluating:

\[ \text{ROE} = 90 - 70 = 20 \]

The ROE is 20%.

ROE Conversion Table

Operating Profit Margin	Asset Turnover	Interest Expense Rate	Equity Multiplier	Tax Retention	ROE
10%	5%	5%	2	7%	-20.00%
10%	7.5%	5%	2	7%	5.00%
10%	10%	5%	2	7%	30.00%
15%	5%	5%	2	7%	5.00%
15%	7.5%	5%	2	7%	42.50%
15%	10%	5%	2	7%	80.00%
20%	5%	5%	2	7%	30.00%
20%	7.5%	5%	2	7%	80.00%
20%	10%	5%	2	7%	130.00%