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
Divide net income by shareholders’ equity
Multiply the result by 100 to get ROE percentage
ROE = (Net Income ÷ Average Shareholders’ Equity) × 100
Example: ROE = ($50,000 ÷ $250,000) × 100 = 20%