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Well, I'm still on level 3, but I'll try to answer. :D If it's in the beginning of a sentence, "Sie" could mean 3 words : she (sie), they (sie), and you (Sie; singular and formal). From the sentence above "Sie ist eine Frau", I can say the "Sie" means "she"; She is a woman. How do I know? Because it's followed by "ist" (the tobe for "he", "she", "it" in German). It's actually quite easy to remember since it's pronounced like the tobe "is" in English. While for "they" and the formal "you", the tobe is "sind".
To differentiate between the last two, you should look at the context. It's like how you distinguish between the single "you" and the plural "you" in English. For example : "Sie sind ein Mann". I can say the subject of this sentence is singular, because it means "a man". So "Sie" in there means "You" (formal form); You are a man. While in "Sie sind Männer", the subject is plural, because "Männer" is the plural form of Mann. So "Sie" in there means "they"; They are men. Hope it helps. Maybe the native speaker can add more detailed explanation to this? :)
*PS : When it comes to action verbs, I can't distinguish between the two. For example : "You drink water" and "They drink water" can have the same translation in German : Sie trinken Wasser.