ROCE (Return on Capital Employed) measures a company’s profitability relative to its total capital (equity and debt), indicating how efficiently it utilizes capital to generate earnings.
ROE (Return on Equity) is a financial ratio that measures a company's profitability relative to its equity, indicating how effectively it uses shareholders' equity to generate profits.
ROCE measures how effectively a company uses all its capital (equity & debt) to generate profits, whereas ROE evaluates how well a company utilizes only shareholders’ equity to yield profits.
ROCE considers both equity and borrowed capital, while ROE considers only equity capital in its calculations.
ROCE helps determine the efficiency of total capital employed, whereas ROE measures profitability from the shareholders’ perspective.
ROCE is calculated using EBIT divided by capital employed, whereas ROE is calculated by dividing net income by shareholder’s equity.
A high ROCE can suggest better management of total capital, while a high ROE implies efficient use of equity for generating profits.
ROCE is beneficial for companies with substantial debt, whereas ROE is more suitable for equity-intensive firms.
ROCE doesn’t factor in financial risk, while a higher ROE might indicate higher financial risk due to leverage.