What is Return on Capital Employed? Description
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.
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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.
See the figure on the right.
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Book: Steven M.
Bragg - Business Ratios and Formulas : A Comprehensive Guide -
Book: Ciaran Walsh
- Key Management Ratios -
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Return on Capital Employed Special Interest Group
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Special Interest Group (37 members)
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Recent topics
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 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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 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 A...
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Compare with: Current Ratio
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ROIC |
Discounted Cash Flow |
Free Cash Flow |
Economic Value Added |
CFROI
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ROCE as Performance Indicator
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