What is ROE? Formula, ranges and example
What is ROE?
Return on equity (ROE) measures the profit generated relative to owners’ equity. Hachiquant divides profit attributable to owners of the parent by average opening and closing owners’ equity and multiplies by 100 to express it as a percentage.
Formula
ROE (%) = profit attributable to owners of the parent ÷ average owners’ equity × 100
- Average owners’ equity = (opening equity + closing equity) ÷ 2. Use the current filing’s same-basis opening comparative. If absent, use the prior annual closing balance only when the accounting standard and consolidation scope match; otherwise, use the closing balance alone.
- Owners’ equity excludes non-controlling interests. Under IFRS, use equity attributable to owners of the parent. Under J-GAAP, owners’ equity = net assets − subscription rights to shares − share acquisition rights − non-controlling interests. Shareholders’ equity alone excludes valuation and translation adjustments and is not a substitute.
- Profit falls back to total net income only when an owners’ split is not reported. Equity falls back to total equity only when owners’ equity is unavailable.
- Missing required inputs or any opening or closing equity balance used in the calculation being zero or negative makes ROE unavailable, not zero.
- A genuine trailing-twelve-month (TTM) window uses closing balances. When TTM is unavailable and the API falls back to annual data, it retains that annual period’s average-balance calculation.
- The API returns roe as a fraction: 0.1 = 10%.
Ranges and interpretation
| Range | Interpretation |
|---|---|
| <0% | A loss relative to positive owners’ equity. |
| 0% | Zero profit, not zero equity or cash. |
| >0% | Profit relative to positive owners’ equity, not a universal healthy level or a buy signal. |
Worked example from a filing
Year ended March 31, 2026 (–)
IFRS · Consolidated · JPY
| Input | JPY million |
|---|---|
| Profit attributable to owners of the parent | 3,848,098 |
| Opening equity attributable to owners of the parent | 35,924,826 |
| Closing equity attributable to owners of the parent | 39,918,854 |
3,848,098 ÷ ((35,924,826 + 39,918,854) ÷ 2) × 100 = 10.1%
For the year ended March 31, 2026, Toyota generated about ¥10.1 of profit attributable to owners of the parent per ¥100 of average owners’ equity. Opening and closing equity come from the comparative and current columns of the same annual filing. This is not a share-price return or a cash receipt.
Source elements
- Profit attributable to owners of the parent
- jpigp_cor:ProfitLossAttributableToOwnersOfParentIFRS
- CurrentYearDuration
- Opening equity attributable to owners of the parent
- jpigp_cor:EquityAttributableToOwnersOfParentIFRS
- Prior1YearInstant
- Closing equity attributable to owners of the parent
- jpigp_cor:EquityAttributableToOwnersOfParentIFRS
- CurrentYearInstant
What to watch
- Debt, buybacks or thin equity can lift ROE without stronger operations.
- Reported profit includes one-offs and is not adjusted. The calculated ratio can differ from the ROE printed in a company’s filing.
- Compare industry peers on the same accounting standard, consolidation scope, currency and period basis.
- Interim returns are not annualized.
- The national ranking uses latest annual figures with a 60% ROE cap to filter outliers, not a recommended target.