he return on common equity ratio measures how much profit is generated for each dollar invested by shareholders in common shares, expressed as a percentage.
For example, a business earns $180,000 in net profit on $1.2 million in common shareholders' equity, producing a return on common equity ratio of 15%. An investor comparing two similar businesses would prefer the one with a higher ROCE, all else being equal, as it generates more profit per dollar of equity invested.
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