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Investing Glossary:
Return on equity (ROE)
Copyright 2010,
Campbell R. Harvey. All Rights Reserved.
Do not reproduce without explicit permission.
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| Indicator of profitability. Determined by dividing Net income for the past 12 months by common stockholder Equity (adjusted for Stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a Company is using its money. ROE may be decomposed into Return on Assets (ROA) multiplied by Financial leverage (total assets/total equity).
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