An increase in return on equity (ROE), over the three most recent years reported, can be a signal that a company has not invested in modernization of plant and equipment or research and development, which in the long run might lead to declining profits.

Question

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An increase in ROE could indicate that a company is not reinvesting profits into necessary areas like modernization or R&D, potentially leading to future profit declines due to outdated operations or lack of innovation.

An Increase in Return on Equity (ROE), Over the Three