ROE = ROA * Leverage

Simply means that you can increase the return from your investment by borrowing money from the bank on the condition that the rate of return is higher than the loan interest rate.

Eg, Vador invests $5,000 and borrow $10,000 from the bank at an interest rate of 11%. The investment makes a return of 14% per year. So,

Return on project is 14% of $15,000 = $2100.
Interest paid to the bank = 11% of 10,000 = $1100
So for that year Vador will keep 2100 – 1100 = $1000 as profit
Return on equity = 1000 divided by 5000
which is a return of 20%

So instead of earning only 14% from the investment, it has been leveraged to 20%

BUT ALL THIS DOESN’T MATTER

I think on a more humane perspective, it means that everyone has his own potential but even if you are the genius of the world, you can’t do everything by yourself.

Hence the need to know how to delegate, and leverage your achievement. Ok now, bomb me if you have any comments.

May the force be with you!!!