How does ROCE differ from Return on Equity (ROE) and why is it more relevant for my business?

ROCE and ROE are both valuable financial metrics, but they focus on different aspects of your business’s performance. While ROE measures the returns generated for shareholders based on their equity investment, ROCE takes into account both equity and long-term debt to evaluate the overall capital efficiency. ROCE is especially relevant for businesses with significant debt and provides a more comprehensive view of how efficiently both equity and borrowed funds are being utilised to generate profits.