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Return on Capital Employed - ROCE
What does it mean?
A ratio that indicates the efficiency and profitability of a company's capital investments.
Calculated as:
In Other Words...
ROCE should always be higher than the rate that the company borrows at, otherwise any increase in borrowings will reduce shareholders' earnings.
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 period.
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Related Terms
EBIT | Return on Assets (ROA) | Return on Equity (ROE) | Return on Investment (ROI)
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