ROE and ROCE Calculator

Return on equity (ROE) compares profit after tax with shareholder equity, the owners’ funds. Return on capital employed (ROCE) compares earnings before interest and tax with the company’s longer-term funding. Enter matching financial-statement figures in the form above. Important limitation: this version displays ROE but does not show its calculated ROCE result. The formulas and example below let you check both ratios separately.

ROE versus ROCE: match the profit to the funding

Return on equity asks how much accounting profit a company earned relative to its owners’ funds. The top part of the ratio is profit after interest and tax. Return on capital employed uses profit before interest and tax because its capital base includes funding beyond shareholder equity. Mixing profit after tax with a pre-tax operating-return formula changes the meaning of the result.

• ROE (%) = profit after tax ÷ shareholder equity × 100.
• ROCE (%) = EBIT ÷ capital employed × 100. EBIT means earnings before interest and tax.
• A common capital-employed definition is total assets minus current liabilities, equivalent to total equity plus non-current liabilities. State the definition you use.

These definitions follow ACCA’s ratio-analysis guide. The form’s help text shortens capital employed to equity plus long-term debt. That shortcut can differ from equity plus all non-current liabilities. When comparing a published company ratio, use the company’s stated definition rather than assuming the figures are interchangeable.

How to Calculate ROCE by Hand

Because the result list above shows ROE and not ROCE, here is the full ROCE sum using the made-up company from the worked example further down. Every figure is in ₹ crore and is an example, not a reported number.

1. Find profit before tax (PBT) in the statement of profit and loss. Example: profit after tax is 120 and tax is 40, so PBT is 160.
2. Add back finance costs (interest paid on borrowings) to reach EBIT, which is earnings before interest and tax. Example: finance costs are 20, so EBIT is 160 + 20 = 180.
3. Work out capital employed from the balance sheet. One common way is total equity plus non-current liabilities. Example: 800 + 400 = 1,200.
4. Divide: ROCE = 180 / 1,200 x 100 = 15%.

Some analysts use total assets minus current liabilities for capital employed, which gives the same number when the balance sheet is arranged that way. Others add shareholders' equity and total debt. Write down the definition you used, because the answer moves with it. See also our balance sheet guide.

ROCE is not suited to banks and most other lenders, because for them interest is the main cost of doing business and the idea of capital employed does not fit. Use other measures for those companies.

What to enter in the four fields

• Net Profit (PAT): use the profit after tax for the period being examined. Keep the ownership scope consistent with the equity figure.
• Shareholder Equity: enter the equity base you have chosen. The form divides by this amount directly; it does not calculate an average for you.
• EBIT (Optional for ROCE): enter the matching pre-interest, pre-tax profit if you are checking ROCE. Leaving this blank does not provide a reliable substitute for the missing accounts figure.
• Capital Employed (Optional): calculate your chosen capital base from the accounts first, then enter it. Do not assume the form can reconstruct the company’s balance sheet.

The fields are labelled in ₹ crore. Keep every entry in that unit. Do not mix a profit in lakh with equity in crore. The ratios compare amounts, so consistent units matter more than the size of the currency amounts. For help locating the entries, use the balance-sheet guide and the annual-report guide.

Use the same reporting period and statement scope throughout. Consolidated accounts include subsidiaries; standalone accounts cover the company alone. Use profit and equity from the same set of accounts. Keep a note of the source statement and the denominator definition beside your result, especially when comparing it with a financial-data website.

Where to Find the Numbers in an Annual Report

Indian listed companies publish quarterly results and an annual report with a balance sheet and a statement of profit and loss. The balance sheet format follows Schedule III of the Companies Act, 2013. Here is where each input usually sits:

Quarterly results cover three months, so annualise with care and do not divide a quarter's profit by full-year equity and call it a yearly ROE. Prefer the full financial year. Our annual report guide shows where each statement sits, and our fundamental analysis guide covers how these ratios fit together. Screening websites calculate ROE and ROCE for you but can use their own definitions, so check the definition before comparing with your own sums.

Worked example: a fictional company

Assume a made-up company has annual PAT of ₹120 crore, shareholder equity of ₹800 crore, EBIT of ₹180 crore and capital employed of ₹1,200 crore. These are illustrative inputs, not reported figures for a listed company. Enter 120, 800, 180 and 1,200 in the corresponding fields.

• ROE = 120 ÷ 800 × 100 = 15%. This matches the form’s direct ROE calculation.
• ROCE = 180 ÷ 1,200 × 100 = 15%. The current form computes this internally but does not display it in the result list.

In this example the ratios happen to match. That does not mean that debt, tax and interest are absent. It only means the selected profit amounts have the same proportion to their respective capital bases. The result is an accounting ratio; it is not a shareholder’s stock-price return or a forecast of next year’s earnings.

DuPont Analysis: What Drives ROE

Two companies can show the same ROE for very different reasons. DuPont analysis splits ROE into three parts so you can see which one is doing the work:

ROE = net profit margin x asset turnover x equity multiplier, where net profit margin is profit after tax divided by revenue, asset turnover is revenue divided by total assets, and the equity multiplier is total assets divided by shareholders' equity. The multiplier is a simple measure of how much of the business is funded by borrowing and other liabilities rather than by owners.

A and B both earn 15%. A keeps a fat margin on each rupee of sales, while B earns thin margins but sells a lot relative to its assets. C earns double the ROE on the same profit only because it has half the equity and funds the rest with liabilities. That higher ROE comes with higher risk, since interest must be paid in bad years too. This is the main reason ROE alone can mislead for a company with a lot of debt. Check it alongside debt to equity or use our debt to equity calculator.

Two cautions apply. Equity can be small or even negative after years of losses or large buybacks, which makes ROE look high or meaningless. And a one-off gain in profit lifts the margin for one year only.

Closing equity or average equity?

CFA Institute’s financial-ratio list defines ROE using average shareholders’ equity. This form accepts a single equity amount, so the choice is yours to make before entering it. If a comparison uses opening and closing equity, calculate that average separately. Label the result clearly so a closing-balance ROE is not compared silently with an average-balance ROE.

For a separate illustration, suppose opening equity is ₹700 crore and closing equity is ₹900 crore. Their simple average is (700 + 900) ÷ 2 = ₹800 crore. With the example PAT of ₹120 crore, entering that average gives ROE of 15%. Entering only the ₹900 crore closing balance gives 13.33%. The profit is unchanged; the equity amount used in the division explains the difference.

A simple opening-and-closing average is still a convention. If capital changed materially within the period, read how the company calculates its own disclosed return measure. Record the method rather than treating every difference from a website as an arithmetic mistake.

What Is a Good ROE and ROCE in India?

There is no official good number, and anyone who gives one is giving a rule of thumb. What matters is how the figure compares with what the money costs and what similar companies earn.

• Against the cost of the money. Shareholders expect a return for the risk they carry. If ROE sits below that expected return, growth may not add value. Example: an ROE of 15% looks fine against a 12% required return and weak against an 18% one. Both rates here are made up.
• Against the same sector. Capital-heavy businesses (power, steel, cement) tend to show lower ratios than asset-light ones (software, consumer brands). Compare a company with its own peers and its own history, not with the whole market.
• Over several years. One high year can come from a one-off gain. Five years of results tell you more.
• With debt in view. A high ROE built on borrowing is riskier than the same ROE built on margins.

The calculator's ROE Quality label uses fixed cut-offs written into the tool: above 20% reads as Excellent, above 15% as Good, above 10% as Average, and 10% or less as Below average (Loss-making at zero or below). Its 'vs Nifty 50 Avg' label compares with a built-in 15%. These are rough tool labels, not official benchmarks or investment advice.

Read the accounts behind a changing ratio

A higher ratio needs an explanation. ACCA’s financial-statement interpretation guidance shows how an asset disposal or revaluation can change capital employed and the resulting return ratio. An increase after an asset sale can have a different meaning from an increase supported by recurring operating profit. Compare the accounts notes before attaching a quality label to the percentage.

For your own comparison sheet, record the numerator, denominator, reporting scope and explanation together. If a ratio rises while equity shrinks, check why the capital base changed. If the profit includes an unusual item, show the reported calculation separately from any adjusted calculation and explain what you removed. Avoid presenting an adjusted estimate as the company’s reported number.

The debt-to-equity explanation helps separate profitability from borrowing. The P/E ratio calculator addresses a different question: how the share price relates to earnings. Neither a return ratio nor a valuation ratio alone establishes that a share is suitable for a particular investor.

Cases that need a separate calculation

• A genuine zero profit or zero EBIT: this version substitutes a preset amount for zero, so calculate the ratio outside the form.
• Zero or negative equity: a conventional positive ROE interpretation is not meaningful; do not accept a reassuring quality label as a financial assessment.
• Missing EBIT or capital employed: obtain the accounts figures before attempting ROCE. Optional fields do not make missing financial data known.
• A company comparison: use matching definitions and actual peer data. The form’s quality and benchmark labels are fixed rules, not current company research.

ROE vs ROCE vs ROA

The tool also shows a Return on Assets output, but it asks for no total assets, so that figure rests on a built-in assumption. Work out ROA yourself from the balance sheet if you need it.

Using Ratios Alongside Your Own Trade Records

ROE and ROCE look at a company's past accounts. They do not tell you when to buy or sell. If you trade stocks and use these ratios to pick names, you can note the ratio and your reason in OneTradeJournal when you log the trade by hand, together with your stop, target, strategy and emotions. The journal then shows over time whether trades made on a stated reason did better or worse than the rest. It places no orders and gives no advice, and the AI features in the paid plan can be wrong. For valuation, see the PE ratio calculator and return on equity.

Sources

• ACCA: ratio definitions and capital employed (checked 15 October 2026).
• CFA Institute: financial-ratio list (checked 15 October 2026).
• ACCA: interpreting financial statements (checked 15 October 2026).