Return on Capital Employed Calculator
This calculator measures Return on Capital Employed (ROCE), a key financial ratio that shows how efficiently a company generates profits from its total capital. It’s widely used by investors, analysts, and business owners to assess long-term profitability.
ROCE (Capital Efficiency) Calculator
ROCE Formula
$$\text{ROCE} = \left( \frac{\text{Operating Profit}}{\text{Capital Employed}} \right) \times 100$$
Where:
-
Operating Profit = Earnings Before Interest and Tax (EBIT)
-
Capital Employed = Total Assets − Current Liabilities
or
= Equity + Non-current Liabilities
Explanation:
ROCE evaluates how much return a company earns on the capital invested in the business. A higher ROCE indicates more efficient use of capital.
ROCE is one of the most reliable indicators of profitability and capital efficiency. It’s commonly used for:
- Comparing performance across companies or industries
- Assessing investment effectiveness
- Strategic decision-making
Example Variables:
- Operating Profit: $500,000
- Capital Employed: $2,000,000
- ROCE = (500,000 / 2,000,000) × 100 = 25%
Use Cases:
- Investors comparing investment opportunities
- CFOs monitoring operational performance
- Business strategy and benchmarking