What is return oncapital employed - performance ratios, Financial Management

What is Performance ratios


Return oncapital employed (ROCE)= (Profit before interest and tax (PBIT) / Capital employed) * 100%

ROCE measures profitability and illustrates how well the business is utilising its capital to generate profits. Capital employed is debt and equity. Equity is shareholders' funds (shareholders 'funds) and debt is noncurrent liabilities. Capital employed can be found from the statement of financial position by taking shareholders' funds (share capital and reserves) and long term debt.

ROCE can be broken down in two parts, asset turnover and operating profit margin.

A low ROCE is either caused by a high capital employed orlow profit margin. A high ROCE is either caused by low capital employed orhigh profit margin. It is hence important to look at the profitability, assets, liabilities and share capital when trying to give reasons for change in ROCE.


Posted Date: 8/31/2013 4:10:01 AM | Location : United States

Related Discussions:- What is return oncapital employed - performance ratios, Assignment Help, Ask Question on What is return oncapital employed - performance ratios, Get Answer, Expert's Help, What is return oncapital employed - performance ratios Discussions

Write discussion on What is return oncapital employed - performance ratios
Your posts are moderated
Related Questions
The value of node is determined using a methodology called backward induction. The value at any node depends on the future cash flows; therefore, we need to start from

How to calculate payment of expenses: SAIB, LLC is a US company that provides cell phone and internet service; it seeks to expand its international operations into Kyrgyzstan.

Do you guys provide Efficient Cash Management assignment help? I need writing a report on Efficient Cash Management.

Dividends and interest payments Payment  of  dividends  and  interest  can  either  be  demonstrated under financing activities or  under operating activities. Sum of the 3

You are currently an Analyst working for a finance publication firm and as part of your responsibilities; you are required to provide a monthly forecast and analysis of certain com

Deferred coupon bonds are generally issued at a discount price and are used for financing leveraged buyouts. The coupon payment on these types o

Question 1: i) Performance budgeting is the best budgeting system. Discuss. ii) Why there is a need for implementing MTEF in the Mauritian Public Sector? Questi

In order to provide for R10 million to build a new warehouse in 5 years time, a company plans to make equal payments at the end of each six months into a fund which earns 9% per ye

Q. What is denoted by weighted average cost of capital OR Composite? How is it calculated? Exemplify with an example. Ans. Weighted Average Cost of Capital: - Capital formation

Suppose that the business uses the double declining balance method to depreciate  its equipment (a)  Determine the net book value, depreciation expense, and accumulated deprecia