|
Please register now to read all responses and to join this discussion yourself. It's easy and 100% free.
|
|
Samir
|
ROCE Lower than Borrowing Rate
Can anyone please break down for me how shareholders earnings will be reduced if ROCE is lower than the borrowing rate? (...) Read more? Sign up for free
|
|
Please register now to read all responses and to join this discussion yourself. It's easy and 100% free.
Sign up for free Log in
|
| |
|
Subhaschandra Shenoy
|
|
Why ROCE Should not Be Lower Than Borrowing Rate?
As you know ROCE = Operating Profit (EBIT) / Equity Shareholders Fund.
As the EBIT reduces, the % of ROCE will be reduced. Hence the minimum ROCE acceptable by shareholders will be just above the current borrowing rate or bank interest.
The shareholder will lose money, if the ROCE is negative or reduced below borrowing rate.
Therefore the ROCE should be 15% to as high as 28% in automotive industry.
|
| |
|
muton
|
|
ROCE
The explanation as to the inverse proportional relationship of ROCE and borrowing rate is not clear.
|
|
|
|
|
More on Return on Capital Employed
|
|
|
Special Interest Group Leader
|
|
|
|
|
|
|
|
|
