Return on Equity

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Return on equity is calculated by taking a year’s worth of earnings and dividing them by the average shareholder equity for that year. The earnings number can come directly from the Consolidated Statement of Earnings in the company’s most recent annual filing with the SEC. It can also be figured as the sum of the past four quarters’ worth of earnings, or as the average of the past five or 10 years’ earnings, or it can even be an annualized figure based on the previous quarter’s results.

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