ROE vs ROCE
ROE measures returns on shareholder equity; ROCE measures operating returns on equity plus debt. Reading both helps reveal when leverage is flattering shareholder returns.
| Measure | ROE | ROCE |
|---|---|---|
| Capital base | Shareholder equity | Equity plus debt capital |
| Profit measure | Net income | Operating profit |
| Debt sensitivity | Can be inflated by leverage | Includes debt in capital |
| Best use | Shareholder return quality | Business-wide capital efficiency |