Ep 121. Investing in Stocks: ROC, ROE, ROIC, ROIIC
Focused Compounding
00:00
The Importance of Leverage in Return on Equity
A good example would be take the cruise industry. The cost of a cruise ship is very, very high versus its sales. It's just that since they have to finance the cruise ships themselves, realistically, they're very constrained in terms of their return on equity or something like that. A lot of railroads have had better returns now. And their better returns have been by becoming more efficient but it isn't in relation to how much sales they're generating.
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