| Definition |
Measures the return earned on total investment. |
Measures the return earned on shareholders’ equity. |
| Formula |
(Net Profit / Total Investment) × 100 |
(Net Income / Shareholder's Equity) × 100 |
| Focus |
Overall profitability from any investment. |
Profitability related specifically to equity holders. |
| Users |
Investors, business managers, analysts. |
Equity investors, shareholders, financial analysts. |
| Scope |
Broad – applies to any investment (marketing, equipment, real estate, etc.). |
Narrow – focuses only on return from equity capital. |
| Capital Considered |
Total capital invested (debt + equity). |
Only shareholder’s equity (excluding debt). |
| Useful For |
Comparing performance across different projects or businesses. |
Evaluating how well a company uses shareholders’ funds. |
| Perspective |
Project or investment-centric. |
Company-centric and equity-specific. |
| Leverage Impact |
Ignores financial structure or leverage. |
Highly impacted by financial leverage (debt can boost ROE). |
| Comparability |
Easy to compare across sectors and investment types. |
Best compared within similar industries or companies. |
| Time Frame |
Can be for any project duration (short or long-term). |
Typically calculated for a financial year. |
| Key Indicator Of |
Efficiency in using capital to generate profits. |
Efficiency in using shareholders’ funds to generate profits. |
| Typical Use Cases |
Evaluating investment in ads, expansion, assets, etc. |
Evaluating company performance from shareholder's view. |
| Example |
Invest ₹1,00,000 in a campaign and earn ₹1,20,000 → ROI = 20% |
Company earns ₹10 lakh profit with ₹50 lakh equity → ROE = 20% |
| Higher Value Means |
Better return from the investment made. |
Better utilization of equity capital by management. |
roi vs roe