ROE answers whether management turns owner capital into profit efficiently. A business earning twenty per cent on equity year after year compounds value internally in a way one earning five per cent cannot, regardless of how fast either grows its revenue.
Leverage inflates it. Because equity sits in the denominator, replacing equity with debt raises ROE without improving the underlying operations at all, which is why it should always be read next to the debt load.
Return on invested capital is the tougher and more informative cousin: it measures returns against debt and equity together, so it cannot be improved simply by borrowing more.