ROE & ROA Calculator
Two standard profitability ratios that answer slightly different questions: how hard is owners’ money working, and how hard is everything the business owns working?
ROE & ROA calculator
Return on Equity and Return on Assets — how efficiently a business turns owners’ capital, and everything it owns, into profit.
Educational illustration only. ROE higher than ROA usually means the business uses debt to amplify returns to equity holders — not automatically good or bad, but worth understanding why the gap exists.
The formulas
ROE = Net Income ÷ Shareholders’ Equity. It measures the return generated specifically on the capital owners have invested.
ROA = Net Income ÷ Total Assets. It measures the return generated on everything the business owns, regardless of how it was financed — debt or equity.
Why ROE can be higher than ROA
Total assets equal debt plus equity. A business financed partly by debt has fewer assets funded by equity than its total assets — so the same net income, divided by a smaller equity base, produces a higher ROE than ROA. This is financial leverage at work: it amplifies ROE in good years, but it amplifies losses the same way when things go badly, since debt still has to be repaid regardless of performance.