About

Analyzing financial performance requires more than just looking at the bottom line. Efficiency ratios decompose how effectively management utilizes capital and assets to generate wealth. This calculator focuses on three pillars of corporate finance: Return on Investment, Return on Equity, and Return on Assets. Crucially, the tool incorporates DuPont Analysis logic to disaggregate ROE into Net Profit Margin, Asset Turnover, and Financial Leverage. This granular breakdown identifies whether returns are driven by operational efficiency or risky leverage, a distinction often missed by basic calculators.

Formulas

The DuPont Identity breaks ROE into three operational components:

ROE = Net IncomeSales × SalesAssets × AssetsEquity

This corresponds to:

ROE = Profit Margin × Asset Turnover × Equity Multiplier

Standard Return on Investment (ROI) is calculated as:

ROI = Gain − CostCost × 100%

Reference Data

Industry Sector	Avg ROE %	Avg ROA %	Net Margin %	Risk Profile
Technology (Software)	17.5%	10.2%	15 - 25%	High Growth / High Volatility
Retail (General)	12.0%	5.5%	3 - 6%	Volume Dependent
Utilities	9.8%	3.2%	8 - 12%	Stable / High Debt
Financial Services	11.5%	1.1%	15 - 20%	Leverage Driven
Healthcare	14.2%	7.0%	8 - 12%	Defensive
Consumer Staples	18.0%	6.5%	5 - 8%	Stable Cash Flow
Energy	10.5%	4.8%	7 - 10%	Cyclical

Frequently Asked Questions

ROE (Return on Equity) measures the return on the shareholders' capital, excluding liabilities. ROA (Return on Assets) measures how efficiently management uses all company resources, including those funded by debt. A company with high debt will often have a much higher ROE than ROA.

The Equity Multiplier indicates the degree of financial leverage. A higher number means the company is using more debt to finance its assets. While this can magnify returns (higher ROE), it also increases insolvency risk.

Generally, yes, but it must be weighed against risk and time horizon. A 20% ROI over 5 years is less impressive than a 15% ROI over 1 year. Additionally, extremely high ROI claims often signal speculative or unsustainable ventures.

For active investors or business owners, these should be recalculated quarterly following financial statement releases. This helps track trends and operational improvements over time.