Both the ratios tell you if capital is being used efficiently. Both the ratios use different numerators and denominators but the purpose is to tell if you are using your assets efficiently and rewarding your stake holders adequately. While ROE only looks at equity shareholders, the ROCE looks at providers of equity and debt capital. Effectively, the ROCE looks at all the key stakeholders. A higher ROE and ROCE is better. Typically, manufacturing companies that are capital intensive have lower levels of ROE and ROCE whereas service companies are better at these ratios. Here again, the trend over the last few quarters and the benchmarking with the industry matters a lot more. Warren Buffett offers a very interesting analysis of ROE versus ROCE. According to Buffett, the ROE and the ROCE should be in the range of 15-20% which is a healthy level. However, both the ROE and the ROCE should be as close to each other as possible.