Remember that return on equity (ROE) measures profits per dollar of the capital shareholders have invested in the company. Meanwhile, return on assets (ROA) measures the same thing, but over the entire asset base, not just equity.

Both are good measures of the overall profitability of a company. Companies with moats will usually have higher returns than their competitors.

There are two decent return benchmarks that can be used across most industries: If a company has generated ROAs in excess of 10% and/or its ROEs have been in excess of 15% for some time, the company may indeed possess a moat.

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