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Reviewed by CA Divyanshu Sengar · Last reviewed 11 October 2026
Enter a period’s revenue, profit, balance-sheet and interest figures to get the main liquidity, leverage and coverage ratios and a DuPont split of return on equity into margin, asset turnover and leverage.
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Return on equity can rise when profitability improves, when assets produce more revenue or when equity financing is reduced relative to assets. The three-factor decomposition multiplies profit margin, asset turnover and the equity multiplier. It is therefore a diagnostic framework, not a score predicting future returns. Its usefulness depends on matching reporting periods, consolidations and accounting policies.
Assume revenue of ₹1 crore, net profit of ₹8 lakh, average assets of ₹95 lakh and average equity of ₹38 lakh. Net margin is 8%; asset turnover is about 1.0526; and the multiplier is 2.5. Their product implies approximately 21.05% ROE, equal to ₹8 lakh divided by ₹38 lakh. This identity is a valuable arithmetic check and prevents the presentation of mutually inconsistent ratios.
Current ratio compares current assets with current liabilities. Quick ratio removes inventory but still includes receivables that may be overdue; it is not the same as immediately available cash. Debt-to-equity depends on the covenant definition of borrowings and equity. Interest coverage is EBIT divided by interest expense and may not be meaningful when interest is zero or exceptional earnings dominate.
Prepare a multi-year bridge rather than a single-year screenshot. Investigate balance-sheet quality, financing costs, lease liabilities, one-off profit, receivable ageing and exceptional assets. For credit analysis, reconcile the ratios to audited statements and the actual loan covenant definitions. A superior numerical ratio can conceal liquidity problems, deteriorating margins or higher risk.
Average equity for the period (opening plus closing, divided by two) so that the ratio matches the period’s profit. Using closing equity gives a different number.
When interest cost is zero the ratio is not meaningful, so the calculator does not divide by zero.
Both express net profit divided by average equity when all inputs are defined consistently.
Rates and rules were checked against these sources on 11 October 2026. Notifications and standards change; confirm on the official site before you file, book or advise.
Educational working tool. Results follow the scope and assumptions above and the figures you enter; they are not tax, audit, legal or accounting advice. Tax and accounting treatment depends on facts and on the law or standard in force for the relevant period, so verify the official source or consult a professional before you rely on a result.
Background, worked examples and the rules behind these numbers.