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What is ROE (Return on Equity)?

Return on equity (ROE) is a company’s net income divided by its shareholders’ equity (its liabilities subtracted from its assets). It is a measurement of how effectively a business uses equity to produce income. A higher ROE could suggest that a company’s management team is more efficient when it comes to utilising investment financing to grow their business. However, a high ROE could also mean the company has taken on a lot of debt.

ROE = Net income / Shareholders' equity

Please note that financial analyses and ratios should not be looked at in isolation when making investing decisions.

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