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End the Religion of ROE

Harvard Business Review

corporation than "what's the ROE on that?" ROE justifies the means. To an extent not widely recognized, it was an equation in the first place that gave ROE the power to dominate not just investment decisions, but an entire business culture. There is no more powerful question in a U.S. Social media spending? Wellness checkups?

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A Refresher on Return on Assets and Return on Equity

Harvard Business Review

I talked with Joe Knight, author of the HBR TOOLS: Return on Investment and co-founder and owner of www.business-literacy.com , to learn more about these ratios and how managers can use them. This is called “denominator management” Not all “denominator management” is fraudulent, says Knight.

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Would You Want Carl Icahn to Run Your Company?

Harvard Business Review

Yet when Icahn doesn't actually get the reins, he often does some good — shaking up complacent boards and management and motivating them to do what it takes to raise their company's share price and get him to go away. He's much better as a gadfly than as a takeover artist.

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Stop Focusing on Profitability and Go for Growth

Harvard Business Review

So, in real terms, debt financing is essentially free. Equity cash flows, in turn, are a function of a company’s long-term return on equity (ROE), growth, and the value of shareholders’ equity on its books. But in most other sectors, ROEs are much greater than the cost of equity capital.

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Idle Funds are the Devil's Playground

Harvard Business Review

He cited the International Monetary Fund's 1997 judgment that "Malaysia is a good example of a country where the authorities are well aware of the challenges of managing the pressures that result from high growth and of maintaining a sound financial system amidst substantial capital flows and a booming property market."

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