ROCE Lower than Borrowing Rate

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			            	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?
				      
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						            	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.
				                
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