Return on Capital Employed (ROCE)

What does ROCE stand for?

Return on Capital Employed

How is it useful?

• Evaluate the overall performance of the business

• Provide a target return for individual projects

• Benchmark performance with competitors

What is the equation?

ROCE (%)= Operating Profit (NET Profit)/ Total Equity + Non-Current Liabilities x100

What is the evaluation of ROCE?

• ROCE is a widely used measure of return on investment by businesses

• Key points to remember:

  • ROCE will vary between industries

  • It is based on a snapshot of a business's balance sheet

  • Comparisons over time and with key competitors are most useful