Return on Capital Employed
(ROCE)

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

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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 Forum
  Evaluating Investment Returns Into the Future by using Return on Capital
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  Acceptable Level of ROCE
What is a good level for ROCE in order for it to b...
     
 
  ROCE Lower than Borrowing Rate
Can anyone please break down for me how shareholde...
     
 
  Versions of ROCE Formula
I am a bit confused: why are there so many differe...
     
 
  What is Return on Average Capital Employed (ROACE). Definition
A variation of this ratio is Return on Average Cap...
     
 

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ROCE as Performance Indicator

The use of the Return On Capital Employed (ROCE) a...
Usage (application): Performance Measurement
 

Financial Statement Analysis | Ratio Analysis

This presentation provides insights in Financial s...
Usage (application): Ratio Analysis, Finanical Statement Analysis
 

ROCE Diagram

Download and edit the 12manage PowerPoint model fo...
Usage (application): Profitability of Capital Investments
 
 

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


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