Return on Capital Employed (ROCE)

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4 Terms

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What does ROCE stand for?

Return on Capital Employed

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How is it useful?

  • Evaluate the overall performance of the business

  • Provide a target return for individual projects

  • Benchmark performance with competitors

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What is the equation?

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

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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