ROCE answers a simple but important question: is this company actually good at turning invested money into profit? It's calculated as operating profit divided by the total capital employed (roughly: equity plus debt). A high ROCE (think 20%+) means the company earns strong returns on the money invested in it — a genuinely efficient business. A low ROCE means a lot of capital is tied up for relatively little profit, which is common in capital-heavy industries like telecom or infrastructure, and not automatically a red flag there — but worth noticing if a company in a capital-light industry (like software) has surprisingly low ROCE.