ROE = Net Income ÷ Average Shareholders’ Equity
Net Income = Profit after taxes
Average Shareholders’ Equity = (Beginning Equity + Ending Equity) ÷ 2
ROE × 100 = ROE percentage
Example: if Net Income = 50,000 and Average Shareholders’ Equity = 250,000
ROE = 50,000 ÷ 250,000 = 0.20
ROE = 20%