Calculate the return on equity (ROE), a profitability ratio that measures how efficiently a company generates profits using its shareholders’ equity.

The return on equity is calculated by dividing the net income by the average shareholders’ equity. Shareholders’ equity represents the residual interest in the assets of a company after deducting liabilities. Note that it is false to take the total assets at the end of the period given that income statements report over the period whereas a balance sheet reports on the period.

ROE provides insight into the company’s ability to generate profits from the investments made by its shareholders. A higher ROE indicates that the company is using its equity effectively to generate higher returns for its shareholders.

The formula is as follows:

\[\text{Return on Equity} = \text{Net Income} / \text{Average Shareholders' Equity} (\text{or Total Equity})\]

Also known as: ROE, shareholders equity return, equity profitability.

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Calculate the Return on Equity (RoE) in Python

The Return on Equity (RoE) is available in the Ratios module of the open-source Finance Toolkit. Install it with:

pip install financetoolkit -U

Then call get_return_on_equity as shown below.

from financetoolkit import Toolkit

toolkit = Toolkit(["AAPL", "TSLA"], api_key="FINANCIAL_MODELING_PREP_KEY")

roe_ratios = toolkit.ratios.get_return_on_equity()

Which returns:

  2021 2022 2023 2024 2025
AAPL 1.4744 1.7546 1.7195 1.5741 1.7142
TSLA 0.2002 0.3248 0.2739 0.1039 0.0485

Parameters

get_return_on_equity accepts the following parameters:

  • rounding (int, optional): The number of decimals to round the results to. Defaults to 4.
  • growth (bool, optional): Whether to calculate the growth of the ratios. Defaults to False.
  • lag (int | str, optional): The lag to use for the growth calculation. Defaults to 1.
  • standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
  • trailing (int): Defines whether to select a trailing period. E.g. when selecting 4 with quarterly data, the TTM is calculated.
Operating Margin Net Profit Margin Interest Burden Ratio Income Before Tax Profit Margin Effective Tax Rate Return on Assets (RoA) Return on Invested Capital (RoIC) Income Quality Ratio Return on Tangible Assets (RoTA) Return on Capital Employed (RoCE) Net Income per EBT Free Cash Flow Operating Cash Flow Ratio

The Ratios module page introduces the module, and the sidebar lists all of its functions.

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