Return on Capital Employed
(ROCE)

Knowledge Center

   

Measuring the efficiency of capital investments. Explanation of Return on Capital Employed. ROCE ratio.

Contents

Premium

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.


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.

ROCE ratio Return on Capital Employed

Book: Steven M. Bragg - Business Ratios and Formulas : A Comprehensive Guide -

Book: Ciaran Walsh - Key Management Ratios -


Return on Capital Employed Special Interest Group


Special Interest Group (37 members)


Return on Capital Employed Forum  

Recent topics

  Acceptable Level of ROCE
What is a good level for ROCE in order for it to be "value adding" in a company?...
     
 
  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?...
     
 
  Evaluating Investment Returns Into the Future by using Return on Capital
If you can invest in firms with a high return on capital at bargain prices, you'll enjoy investment success.
The key to investment success over t...
     
 

Best Practices - Return on Capital Employed
  What is Return on Average Capital Employed (ROACE). Definition
A variation of this ratio is Return on Average Capital Employed (ROACE), which takes the average of opening and closing capital employed for the time ...
     
 
  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...
     
 

Expert Tips - Return on Capital Employed



Advance yourself in business administration and management



Resources - Return on Capital Employed

ROCE as Performance Indicator

 

Financial Statement Analysis | Ratio Analysis

 

ROCE Diagram

 
 

News about Roce Ratio


     
 

News about Roce Capital


     
 

Videos about Roce Ratio


     
 

Videos about Roce Capital


     
 

Presentations about Roce Ratio


     
 

Presentations about Roce Capital


     
 

Books about Roce Ratio


     
 

Books about Roce Capital


     
 

More about Roce Ratio


     
 

More about Roce Capital


     



Accelerate your management career



Compare with: Current Ratio  |  Cash Ratio  |  ROIC  |  Discounted Cash Flow  |  Free Cash Flow  |  Economic Value Added  |  CFROI


Return to Management Hub: Finance & Investing


More Management Methods, Models and Theory

Special Interest Group Leader

 


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2018 12manage - The Executive Fast Track. V15.0 - Last updated: 12-12-2018. All names ™ of their owners.