ROE

Return on equity divides net profit by shareholders' equity. It shows how much the company earned in a year on the money its owners put in. An ROE of 15% means 15 earned for every 100 of equity.

It is known as one of Warren Buffett's favourite measures. A business that earns more from the same capital is simply better, and reinvesting those profits compounds the advantage. Sustaining 10 to 15% or more is generally considered strong.

High ROE is not always skill, though. Taking on debt shrinks equity and lifts ROE automatically. Always read it alongside the debt ratio — a company posting high ROE without heavy borrowing is the genuinely strong one.

Consistency matters more than any single year. A one-off gain from selling assets can spike the number once. What counts is whether it stays high across five or ten years. Normal levels differ by industry, so comparing against direct competitors tells you more than the absolute number does.