Return on Equity (ROE) = Net Income ÷ Shareholders’ Equity
Use net income from the income statement
Use average shareholders’ equity for the period if available
Average shareholders’ equity = (Beginning equity + Ending equity) ÷ 2
Multiply the result by 100 to get a percentage
ROE (%) = (Net Income ÷ Average Shareholders’ Equity) × 100
Example: if net income is 50,000 and average equity is 250,000, ROE = 20%