Conclusion ROCE, or Return on Common Equity, stands out in financial analysis as a particularly useful ratio. The Price-to-earnings ratio, on the other hand, may be considered less valuable in certain contexts. 1 A company's return on equity (ROCE) is a measure of how efficiently management uses shareholders' funds for profit generation. Earnings are generated more efficiently when a company has a higher ROCE. 2 Investors are able to figure out how much return they can expect from their investments with the help of this tool.Investing in a company with a consistently high ROE can attract investors who are looking for efficient capital management. 3 Comparing ROCEs in the same industry revealed which firms were leveraging their equity more efficiently. Some potentially less valuable ratios and why: The Price-to-Earnings Ratio is frequently used when valuing companies, but it can be misleading when used in certain situations, especially for rapidly growing companies or mature companies in declining industries. The current ratio serves as an indicator of short-term liquidity, but not of a company's long-term profitability or solvency. A company with a high inventory turnover (like fast-food restaurants) may not be as efficient as one with a lower turnover