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Reconciling the ROE with an Example

You’re a finance person, right? If you’re not, why would you be on this website? Maybe you’re looking to become a finance person, or maybe you want to get better at investing.Whatever your motivation for learning finance, you’re likely to come across financial ratios. It’s not the only financial concepts that you’ll work with, but […]

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How Return on Equity Is Deceiving You

Analysts love Return on Equity (ROE) when analyzing companies. They love it because it separates good companies from bad, at least that is the thought process behind this indicator. However, you will discover how Return on Equity is deceiving you when you read this article.Suppose the ROE for one company is 22 and for another […]

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Return on Equity: The Hidden Leverage Time Bomb

Analysts love the Return on Equity (ROE) ratio and with good reason. A high ROE usually signifies a great company. Therefore, you may be tempted to use a stock screener and plug in a high number for the ROE and use the results as your list of companies to invest in.The problem is the ROE […]

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