Return on Equity (RoE)

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 equity at the end of the period, given that an income statement reports over the period whereas a balance sheet reports at a point in time; the average equity over the period is used instead.

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:

ROE is usually read through the DuPont analysis (Toolkit.models.get_dupont_analysis), which splits it into net margin, asset turnover and the equity multiplier, because the same ROE can come from high margins or from a thin equity base. Large buybacks and accumulated losses shrink equity and can push ROE to extreme or negative values (well above 1 for heavy buyers of their own shares), in which case ROIC or ROA says more. For banks and insurers ROE is set against the cost of equity, and together with the price-to-book ratio it explains much of their valuation.

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

Return on Equity (RoE) in Python or via the MCP

Install the Finance Toolkit with:

pip install financetoolkit -U

Then call get_return_on_equity as shown below.

from financetoolkit import Toolkit

toolkit = Toolkit(
    ["JPM", "GS", "MS"],
    api_key="FINANCIAL_MODELING_PREP_KEY",
    start_date="2021-01-01",
    end_date="2025-12-31",
)

toolkit.ratios.get_return_on_equity()

Or, after setting up the Finance Toolkit MCP, ask:

Which returns:

Parameters

get_return_on_equity accepts the following parameters.

Related Profitability Ratios