ROE directly reflects a firm's use of leverage.

Name: ROE directly reflects a firm's use of leverage.
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ROE (Return on Equity) takes into account the amount of debt a company uses to finance its operations. Higher levels of debt result in higher leverage, which can increase ROE if the borrowed funds are used to generate higher returns. Conversely, if a company has low levels of debt, its ROE may be lower as there is less leverage to boost returns.

ROE Directly Reflects a Firm's Use of Leverage