What is return on equity?

How to calculate it

Take net income and divide it by the average of equity at the start and the end of the year.

Apple, the year that ended in September 2026:

• Net income: $132 billion
• Equity at the start of the year: $73.7 billion
• Equity at the end of the year: $112 billion
• Average: $92.9 billion
• $132 billion / $92.9 billion = 142.3%

Return on equity at the largest companies

Net income is the owners' share, and so is the equity here.

Above 100%

Apple's number doesn't mean the business earns more than 100% on what it has invested. It means equity is small, and Apple's equity ratio was 27.7%.

That year Apple spent $86.4 billion on buying back its own shares. Money paid out that way leaves equity. So the divisor shrinks, and the number rises, with nothing else changed.

Mastercard's return was 210.5% with an equity ratio of 14.3%. When equity gets this small, the number says more about the balance sheet than about the business.

The same number, different risk

Debt works the same way. If a company borrows instead of raising money from its owners, equity is smaller and profit is divided by a smaller number. In a good year the return rises. In a bad year the interest still has to be paid. Walmart had 23.0% with an equity ratio of 37.3%, so read the number next to debt.

Where it is low or high for other reasons

Banks. Banks are often compared on this number in particular, because equity is what they work with. JPMorgan Chase is at 16.1%.

One-off items. A one-off gain lifts the number that year, and a large write-down lowers it, so look at several years, as with margins.

What it doesn't say

It says what the company earns on book equity, not what you earn on the stock. You buy at today's price, often far above book value, which is what the price-to-book ratio shows.

More numbers are on Apple's stock page.