Quote Originally Posted by Snoopy View Post

If you buy shares in Telecom you become a shareholder and you get your slice of shareholders equity - that's true. However you cannot buy shareholders equity on its own. You also have to buy your fair share of shareholder debt which is included in the purchase price of the Telecom shares you buy. You have to buy the shareholders equity AND debt, which together add up to the sum of the company assets, as part of one purchase package.

SNOOPY
Snoopy - If a competitor took over Telecom as a company, your assertion is correct. But if you buy its equity, or a share of its equity, then you are not buying its respective debt. There is a distinction between the "value of the firm" versus the "value of equity" - the difference between both being the "value of debt". When you apply your Buffet spreadsheets to a company to reach a suggested share price, you are purely valuing the equity. ROE is the indicator that allows to do that. ROE does not lead you by itself to reach to the value of the firm.