ROCE is a ratio which indicates the efficiency and profitability
of the capital investments of a company.
In other words: the ROCE ratio is an indicator of how well a company
is utilizing capital to generate revenue.
ROCE should normally be higher than the borrowing rate from the company,
otherwise any increase in borrowings will reduce shareholders' earnings.
Calculation of Return on Capital Employed. Formula
The calculation of Return on Capital Employed is done by taking profit
before interest and tax (EBIT) and dividing
that by the difference between total assets and current liabilities.
Book: Steven M.
Bragg - Business Ratios and Formulas : A Comprehensive Guide
Book: Ciaran Walsh
- Key Management Ratios
Special Interest Group
Return on Capital Employed Special Interest Group.
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Acceptable Level of ROCE
What is a good level for ROCE in order for it to be "value adding" in a company?...
Versions of ROCE Formula
I am a bit confused: why are there so many different variations of the same formula for example I was told that ROCE was Net Profit divided by Fixed Assets plus Current Assets ?...
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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Ratio Analysis, Finanical Statement Analysis This presentation provides insights in Financial statement and ratio analysis, and includes the following sectios:
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