Return On Capital Employed (Roce) Definition
Return on capital employed (ROCE) is a financial ratio that measures the percentage of profit a company generates from its capital investments.
To calculate ROCE, divide a company’s operating income by its capital employed. Operating income is calculated by subtracting a company’s operating expenses from its total revenue. Capital employed is the total value of all the funds used to finance a company’s operations, including equity and debt.
ROCE is an important metric for assessing a company’s profitability and efficiency. A higher ROCE indicates that a company is generating more profits from its capital investments, while a lower ROCE means that it is not as efficient in using its capital.
Companies with high ROCEs are usually considered to be well-managed and efficient, while those with low ROCEs may be inefficient and poorly managed.
