ROCE

• what is return on capital employed? ROCE

  a profitability ratio that measures how efficiently a business is using capital employed to generate profits
• what is the equation for ROCE?

  operating profit/capital employed x100
• what is return on investment?

  the financial benefits or profits made from an investment, such as setting up a production location in another country
• what should a ROCE figure look like?

  a high %
• what should a ROCE figure be compared with?

  • ROCE from previous years
  • ROCE of competitors
  • current base rate of interest
• how can a low ROCE be improved?

  • increasing operating profits without increasing long term loans
  • repaying existing long term loans
• what does ROCE help make rescissions about?

  • managers financial rewards
  • efficiency targets
  • future investments
  • disposal or purchase of non current assets
  • capacity utilisation targets