ROE in UAE: Calculation, Benchmarking & Improvement

Return on Equity (ROE) shapes investor confidence, borrowing capacity, valuation discussions, and capital-allocation decisions in the UAE. In sectors such as real estate, e-commerce, and healthcare, where capital intensity and leverage vary widely, viewing ROE in isolation can create a misleading picture of performance and risk.

This becomes clearer when looking at Dubai-listed companies, which recorded a 29.7% year-on-year rise in Q3 net profits to USD 8.1 billion (AED 66.47 billion). Growth was largely driven by banks, utilities, and real estate, highlighting how sector dynamics shape shareholder returns.

So, in this blog, you'll learn how to calculate ROE accurately, what healthy ROE looks like across industries, how DuPont analysis reveals the drivers of returns, and how to apply ROE in budgeting, forecasting, and strategic decisions.

TL; DR

• ROE Measures Capital Efficiency: ROE shows how effectively your business converts shareholder equity into profit across sectors such as real estate, e-commerce, and healthcare.
• Calculation Requires Context: Accurate ROE depends on clean net income data, adjusted equity figures, and careful review of leverage impact.
• Industry Benchmarks Vary: Healthy ROE levels differ by sector, with capital-intensive industries typically operating in lower ranges than asset-light businesses.
• DuPont Analysis Adds Depth: Breaking ROE into profit margin, asset turnover, and equity multiplier reveals whether returns are driven by operations or leverage.
• Interpretation Mistakes Distort Insight: Ignoring debt, one-time gains, capital structure shifts, or a low equity base can inflate ROE and mislead strategic decisions.

How ROE Shows Your Company’s Efficiency and Profitability in the UAE?

Return on Equity (ROE) is an important metric for finance leaders in the UAE to assess how effectively a company uses its capital to generate profit. In sectors like real estate, e-commerce, and healthcare, ROE provides insights into operational efficiency and overall business profitability.

Here’s how ROE shows your company’s efficiency and profitability in the UAE:

1. Capital Efficiency in Real Estate

Real estate companies often struggle to allocate capital to high-cost projects. ROE helps show whether the money invested is generating solid returns. A high ROE means investments are paying off, making it easier to allocate capital effectively.

Suggested Read: Understanding and Analysing Real Estate Balance Sheet

2. Profitability in E-commerce

E-commerce businesses often deal with high customer acquisition costs and tight margins. ROE shows how effectively marketing and operations convert investments into profits.

A strong ROE indicates the company is managing costs efficiently and staying profitable despite industry challenges.

3. Operational Efficiency in Healthcare

Healthcare companies need to control costs while maintaining profitability. ROE reveals whether resources are being used efficiently across services or departments. A low ROE highlights areas where resources could be managed better to improve profits and overall financial performance.

4. Attracting Investors with Strong ROE

Startups and growing companies often need to prove financial performance to attract investors. A consistent, high ROE shows that the business is using capital effectively, reassuring investors that their money will generate returns and supporting funding for future growth.

5. Budgeting and Forecasting with ROE

Forecasting growth and setting budgets can be tough for finance teams. ROE helps evaluate how past investments performed, guiding future financial planning. This allows you to refine budgets and forecasts, improving decision-making and resource allocation.

Once you understand why ROE matters for efficiency and profitability, the next step is knowing how to calculate it accurately.

5 Steps Finance Leaders Follow to Calculate & Interpret ROE Accurately

Calculating Return on Equity (ROE) is important to understand how effectively your company is using its equity to generate profit. This metric is especially valuable in sectors like real estate, e-commerce, and healthcare, where operational efficiency and capital allocation directly influence profitability.

Here’s how finance leaders calculate ROE and interpret it accurately to support data-driven business decisions:

1. Understand the Components of ROE

To calculate ROE, use the formula:

ROE = Net Income / Shareholder Equity

• Net Income: The total profit after taxes, interest, and expenses. This shows how profitable your company’s operations are.
• Shareholder Equity: The total value of assets minus liabilities, representing the owners’ stake in the business.

For finance teams in the UAE, ensuring the accuracy of net income and equity figures is essential for calculating true ROE. In sectors like real estate, where property values change often, use the most recent data to keep equity calculations reliable.

2. Adjust for Debt in the ROE Calculation

For many UAE businesses, especially in capital-intensive sectors, debt is a major part of financing. While debt can increase ROE, it can also give a misleading picture if not reviewed carefully.

• Debt-Adjusted ROE: Businesses with significant debt should review ROE alongside metrics such as Return on Assets (ROA) and the equity-to-debt ratio. This provides a clearer view of how debt affects returns.

You need to regularly check whether a high ROE is driven by strong performance or simply higher leverage.

3. Use Real-Time Financial Data for Accurate Calculation

In sectors like e-commerce or SaaS, where margins can change quickly, using outdated data can lead to incorrect conclusions.

• Real-Time Insights: By using up-to-date financial data from integrated accounting and expense systems, finance teams can track ROE trends more frequently and improve decision-making accuracy. This makes it easier to adjust strategies based on current performance.

At Alaan, we give finance teams real-time visibility into company-wide spending, with automated expense capture and direct accounting integrations. This ensures the financial data used in ROE analysis remains clean, up-to-date, and ready for accurate reporting.

4. Account for Non-Recurring Events

In the UAE, businesses in sectors such as real estate and healthcare may experience one-time events, such as asset sales or tax refunds. These can temporarily increase or decrease ROE, creating confusion.

• Excluding Non-Recurring Events: Removing one-time gains or losses from the calculation helps ensure ROE reflects actual operating performance rather than temporary changes.

This allows you to focus on sustainable profitability and make better long-term decisions.

5. Combine ROE with Other Metrics for Deeper Insights

While ROE is an important metric, it should not be used alone. To understand your company’s financial health more clearly, review ROE alongside other key performance indicators, such as:

• ROA (Return on Assets): Shows how efficiently the business uses its assets to generate profit.
• Gross Profit Margin: Helps track whether operational efficiency is improving, along with ROE.

By reviewing ROE together with these metrics, you can make more confident decisions on investments, resource allocation, and profitability.

This calculation becomes more meaningful when you know what a healthy ROE looks like and how to strengthen it.

What is a Good ROE and How to Improve It for Your Business?

A good ROE depends on the industry, market conditions, and the company’s growth stage. In the UAE, businesses in sectors such as real estate, e-commerce, and healthcare often target ROEs of 12% to 20%. Here’s why:

• Real Estate: Because it is capital-intensive, an ROE between 12% and 15% is considered healthy. A higher ROE shows efficient use of capital in property investments, while a lower ROE may indicate inefficiencies in project execution or capital allocation.
• E-commerce: For fast-growing e-commerce businesses, a ROE of 15% to 20% is ideal. This shows the business is scaling while maintaining profitability despite high customer-acquisition costs.
• Healthcare: A ROE of 10% to 15% is considered strong for healthcare companies, as the industry often faces high regulatory costs that affect profitability. A higher ROE reflects better operational efficiency in resource-intensive environments.

Also Read: Hospital Accounts Receivable: A Practical Guide For Healthcare Finance Leaders

To improve ROE, focus on increasing profits while using equity more efficiently. Here are some practical strategies for growing businesses in sectors like real estate, e-commerce, and healthcare:

1. Optimise Capital Allocation

As businesses grow, allocating capital efficiently becomes more difficult, especially in capital-intensive sectors such as real estate and logistics.

How to Improve ROE:

• Regularly review returns on each investment and shift funds to the most profitable areas.
• In real estate, consider selling underperforming properties and reinvesting in higher-return developments or land.
• In e-commerce, review marketing performance and ensure spending delivers strong returns relative to customer acquisition costs.

2. Focus on Operational Efficiency

Many e-commerce and healthcare businesses face rising operational costs that affect ROE.

How to Improve ROE:

• Identify and remove operational inefficiencies. In e-commerce, automating repetitive tasks, such as order processing, can reduce costs.
• In healthcare, improving procurement processes and reducing facility overheads can increase profitability.
• Track ROE alongside operational metrics, such as asset turnover, to ensure assets are used effectively.

3. Improve Profitability by Increasing Margins

Many businesses, especially in real estate and e-commerce, face thin margins due to competition and rising costs.

How to Improve ROE:

• Improve pricing strategies to increase margins. In e-commerce, focus on increasing customer lifetime value through loyalty programmes and repeat purchases.
• In real estate, better property management and more efficient construction and renovation can improve returns.

4. Use Automation to Improve Efficiency

Manual processes slow financial reporting and forecasting, thereby affecting ROE.

How to Improve ROE:

• Use AI-powered tools to automate processes like expense management, invoicing, and tax compliance.
• Automation improves accuracy, saves time, and helps ensure capital is used efficiently, which strengthens ROE.

At Alaan, we automate expense tracking, invoice capture, and multi-level approval workflows, so you maintain tighter control over operational spend. Cleaner data and stronger controls translate directly into more reliable profitability metrics, including ROE.

Must Read: How to Automate Your Accounting Workflow Process: A Complete Guide

Knowing what makes a good ROE and how to improve it also helps you apply DuPont analysis more effectively.

How to Use DuPont Analysis to Optimise ROE for UAE Businesses?

The DuPont Analysis offers deeper clarity by breaking ROE into three core components: profit margin, asset turnover, and equity multiplier. This approach helps you pinpoint areas for improvement, manage risk more effectively, and make more confident financial decisions.

Here’s how you can use DuPont analysis to optimise ROE for UAE businesses:

1. Profit Margin

Real estate and e-commerce companies in the UAE often face high operational costs that put pressure on profit margins.

How DuPont Helps:

• Profit margin shows how efficiently your business converts revenue into profit.
• For e-commerce businesses, improving profit margins may involve lowering customer acquisition costs or streamlining operations.
• In real estate, improving property management efficiency or capitalising on market opportunities can strengthen returns and profitability.

2. Asset Turnover

In sectors like real estate and logistics, companies often struggle to fully utilise their capital-intensive assets.

How DuPont Helps:

• Asset turnover measures how effectively a company uses its assets to generate revenue.
• In real estate, this could mean improving land utilisation or optimising property portfolio performance.
• E-commerce businesses can improve asset turnover by adopting automation and strengthening supply chain efficiency to reduce waste.

3. Equity Multiplier

Many startups in the UAE depend heavily on debt, which can increase ROE but also raises financial risk.

How DuPont Helps:

• The equity multiplier shows how much of the company’s assets are financed through debt.
• Higher leverage can increase ROE, but it also increases financial exposure.
• By tracking the equity multiplier, businesses can ensure debt is used wisely and maintain a more sustainable and balanced ROE.

Even with detailed insights from DuPont Analysis, correctly interpreting ROE remains essential.

3 Common Mistakes When Interpreting ROE and Ways to Avoid Them

Interpreting Return on Equity (ROE) accurately is essential for sound financial decision-making. However, some mistakes can distort the picture, leading to flawed strategies and affecting overall profitability.

1. Failing to Consider Capital Structure Changes

Mistake: Startups and growing companies in the UAE often change their capital structure by issuing new shares or bringing in investors.

How to Avoid It: Adjust ROE for any changes in capital structure. New equity injections can dilute shareholder equity and artificially boost ROE. Always interpret ROE alongside changes in equity to avoid misleading conclusions.

2. Misinterpreting ROE Due to Low Equity Base

Mistake: Companies with a small equity base, common in startups or highly leveraged businesses, can show an inflated ROE.

How to Avoid It: Always review ROE alongside equity levels. A low equity base can exaggerate ROE and mask potential risks. Check the equity-to-debt ratio to see if ROE is sustainable or driven by risky leverage.

3. Including Uncontrolled or Unverified Expense Data in ROE

Mistake: ROE calculations often rely on financial data that includes duplicate expenses, missing receipts, or incorrectly categorised costs. This can understate profit and distort the true return on equity.

How to Avoid It: Ensure all expenses are properly reviewed, categorised, and approved before closing the books, with complete documentation to support accuracy. Regular audits and structured expense controls help identify duplicate or incorrect entries and improve the reliability of net income used in ROE calculation.

How Alaan Supports Better Return on Equity Analysis Through Smarter Spend Control?

Many UAE finance teams focus on revenue growth when ROE weakens, but equity returns are also influenced by cost control, reporting accuracy, and visibility into operational spending.

At Alaan, we support finance teams by providing real-time spend visibility, structured approvals, and accounting sync, helping ensure the financial data used in ROE analysis is complete, accurate, and up to date.

What Alaan Supports Beyond Basic Spend Tracking

At Alaan, we strengthen financial controls and improve visibility into company spending, helping finance teams maintain accurate financial records that support profitability and ROE analysis.

1. Real-Time Spend Visibility

Finance teams can track departmental and operational spending in real time, improving awareness of cost trends and helping identify unusual or unexpected expenses earlier.

2. Structured Approval Workflows for Spend Control

Multi-level approval workflows help ensure expenses are reviewed and authorised before they are incurred, supporting internal financial controls and budget oversight.

3. Automated Expense Capture for Accurate Reporting

We automate invoice capture, receipt matching, and duplicate detection, reducing manual errors and helping finance teams maintain accurate, timely financial records for profitability and ROE analysis.

4. Accounting Integration for Continuous Insight

We sync spending, approvals, and documentation with your accounting system to keep financial data up to date and reduce reconciliation delays.

5. Centralised Spend and Vendor Visibility

We consolidate spending and vendor data into a single platform, giving finance teams clearer visibility into operational costs and enabling accurate financial reporting and analysis.

What Alaan Is (And Is Not)

Alaan is not a replacement for accounting software or financial modelling tools.

Instead, we provide spend controls, real-time visibility, and structured governance that help ensure the financial data used in profitability and ROE analysis is accurate and reliable.

Final Thoughts

Return on Equity can guide smart capital decisions or mislead you if you don’t look deeper. The difference comes down to how deeply you examine what drives the number.

When you link ROE to margin discipline, asset efficiency, capital structure, and forward-looking forecasts, it becomes a practical decision-making tool. It shows you where to deploy capital, when to adjust funding, and which projects genuinely create shareholder value.

At Alaan, we help finance teams maintain that clarity. With real-time spend visibility across company expenses, structured approval workflows, and automated syncing with your accounting systems, teams can maintain stronger financial control and rely on cleaner, more structured cost data for financial reporting and analysis.

Book a free demo to see how Alaan helps finance teams improve spend visibility and strengthen financial control across company spending.

FAQs

Q1. What is the difference between ROE and ROIC for UAE businesses?

A1. Return on Equity (ROE) shows how well shareholder equity is generating profit, while Return on Invested Capital (ROIC) considers returns on both debt and equity. For capital-intensive sectors in the UAE, ROIC provides a clearer picture of how efficiently capital is being used, especially when companies carry significant debt.

Q2. What are the key limitations of ROE for finance leaders?

A2. ROE can look good on paper because of high leverage, asset revaluations, or a smaller equity base, even if the business has operational weaknesses. Finance teams should always check ROE alongside leverage ratios, cash flow, and asset turnover to get a true sense of performance.

Q3. What does a negative ROE indicate in growing UAE businesses?

A3. A negative ROE usually points to losses or shrinking capital, which could mean operational inefficiencies, over-expansion, or pricing pressure. In fast-growing sectors like e-commerce or tech, a temporary negative ROE can happen during expansion, but if it lasts, it’s a sign that changes are needed.

Q4. What operational factors typically cause ROE to increase?

A4. ROE rises when net income increases, assets are used more effectively, or capital is structured smartly with balanced leverage. Sustainable gains often come from higher margins, better cost control, and improved asset turnover, rather than short-term financial tweaks.

Q5. How should CFOs use ROE in board-level decision-making?

A5. CFOs can use ROE to see if capital allocation is meeting shareholder return goals and supporting growth plans. When combined with DuPont analysis, leverage ratios, and future projections, ROE becomes a more powerful tool for planning capital and communicating with investors.