i What this calculator does
Quick answer: Work out return on equity and break it into margin, asset turnover and leverage using the DuPont decomposition. With the default inputs (net profit 2 450, revenue 28 400), it returns return on equity of 13.24%.
Return on equity measures how much profit a company produces from the capital shareholders have left in it. It is the single most useful summary of business quality, and the reason a company can justify trading above book value.
The DuPont decomposition splits it into three parts: profit margin, asset turnover and financial leverage. That matters because a high ROE achieved through debt is a different thing from the same ROE achieved through margin.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
How to use the Return on Equity Calculator
The inputs carry workable values from the start. Nothing has to be entered to get a number on screen.
- 1. Net Profit (R million)
- 2. Revenue (R million)
- 3. Total Assets (R million)
- 4. Shareholders Equity (R million)
- 5. Cost of Equity (%) For comparison; value is created above this
The result panel reports:
- Return on Equity Profit per rand of equity
- Return on Assets Before the leverage effect
- Value Spread ROE less cost of equity
Alongside the headline figures, the calculator reports net profit margin, asset turnover, financial leverage, cost of equity. Those are the numbers that usually explain why the headline result came out where it did.
Below the figure, the calculation is shown in full, so you are not asked to take it on faith.
See also: Discounted Cash Flow Calculator.
Common results
What the calculator returns as the net profit changes, with every other input at its default (revenue 28 400, total assets 42 600, shareholders equity 18 500, cost of equity 16.7).
| Net Profit | Return On Equity | Return On Assets | Value Spread |
|---|---|---|---|
| 750 R million | 4.05% | 1.76% | -12.65% |
| 1 500 R million | 8.11% | 3.52% | -8.59% |
| 2 500 R million | 13.51% | 5.87% | -3.19% |
| 5 000 R million | 27.03% | 11.74% | 10.33% |
| 10 000 R million | 54.05% | 23.47% | 37.35% |
| 20 000 R million | 108.11% | 46.95% | 91.41% |
Figures used in this calculator
The South African constants this calculator relies on, with the page that holds the current value and the date it was last verified.
- Company tax: 27%. Source: Company Tax Rates Reference (verified 29 September 2026).
- Securities Transfer Tax: 0.25% on share purchases. Source: JSE Trading Cost Schedule (verified 27 September 2026).
- JSE trading hours: 09:00 to 17:00 SAST. Source: JSE Trading Hours and Holidays (verified 27 September 2026).
How the calculation works
The calculator takes five inputs: Net Profit, Revenue, Total Assets, Shareholders Equity and Cost of Equity. Cost of Equity: For comparison; value is created above this. The roe is R2 450m / R18 500m = 13.24%. The margin is R2 450m / R28 400m = 8.63%. The turnover is R28 400m / R42 600m = 0.67x. The leverage is R42 600m / R18 500m = 2.30x. The breakdown also lists net profit, revenue, total assets and shareholders equity.
A worked example in rand
With the default inputs (net profit 2 450 R million, revenue 28 400 R million, total assets 42 600 R million, shareholders equity 18 500 R million and cost of equity 16.7%), the calculator returns a return on equity of 13.24%, profit per rand of equity. It also reports return on assets 5.75% and value spread -3.46%. Double the net profit to 4 900 and the return on equity moves from 13.24% to 26.49%, the return on assets moves from 5.75% to 11.50% and the value spread moves from -3.46% to 9.79%.
How to read the result
With these inputs the calculator's own verdict reads: "ROE is below the cost of equity. Retained profit is worth less inside the company than returned to shareholders." The verdict changes as the inputs cross the thresholds the calculator uses, and it is the fastest way to see which side of them you are on. Valuation ratios only mean something against a benchmark: the sector, the share's own history, or the market. A P/E of 12 is cheap for a software company and expensive for a mining house. The background to this calculation is in What Is Equity in a Trading Account?.
The South African angle
Three things change the picture for a South African trader using the return on equity calculator. Resource companies dominate the JSE All Share, which gives the index a cyclical character and makes sector comparison more important than for a US index when judging a ratio. The JSE requires results to be published within three months of the period end and interim results within three months of the half-year, which is the cadence at which the inputs to these calculators change. JSE companies report under IFRS and many present headline earnings per share, a South African measure that strips out certain items, alongside basic EPS; the two can differ materially. The figures behind these points, and the ones the return on equity calculator itself uses, are on the JSE indices reference.
Spotted an outdated figure? If a rate, limit or formula in this calculator no longer matches its source, email us the page and the source. A material correction is dated on the Updates Log.
Frequently asked questions
What is a good ROE?
Above the cost of equity, which in South Africa is often 15% to 18%. A company earning 12% on equity while its shareholders require 16% is destroying value even though it is profitable. That spread matters more than the absolute figure.
Why does DuPont matter?
Because two companies can report the same ROE for very different reasons. One earns it through high margins; another through borrowing heavily. The first is a quality business; the second is a leveraged one, and they behave very differently in a downturn.
Can ROE be too high?
It can be misleadingly high. Heavy buybacks shrink equity and inflate the ratio. So does a large write-down. An ROE well above the sector is worth investigating rather than celebrating, and the leverage multiplier usually explains it.
Should I use opening, closing or average equity?
Average equity over the period is the technically correct choice, because the profit was earned across the year. Closing equity is what most quoted figures use. The difference matters most for companies that raised or returned capital during the year.
How does ROE relate to price to book?
A company earning more on its equity than shareholders require should trade above book value, and the premium should rise with the spread. That relationship is the theoretical link between the two ratios.
Does ROE work for banks?
Yes, and it is the standard measure for them. Bank leverage is far higher than in industrial companies by the nature of the business, so comparisons should stay within the sector.
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