Also found in: Acronyms.


Return on Capital Employed

A measurement of return on the investment needed for a business to function, otherwise known as capital employed, expressed as a dollar amount or a percentage. It is used to show a business' health, specifically by showing how efficiently its investments are used to create a profit. A good ROCE is one that is greater than the rate at which the company borrows.

Because capital employed has no set definition, there are different ways to calculate ROCE. Two common ways are:

ROCE = (Operating Profit Before Tax) / (Total Assets - Current Liabilities) and ROCE = ((Profit before Tax) / (Capital Employed)) * 100.

One limitation to ROCE is the fact that it does not account for depreciation of the capital employed. Because capital employed is in the denominator, a company with depreciated assets may find its ROCE increases without an actual increase in profit. It also neglects inflation, which might depress ROCE unnecessarily. See also: Return on Average Capital Employed (ROACE), Required return.


References in periodicals archive ?
4 Using the opening capital employed figure in this calculation and the average or closing capital employed figure in the ROCE calculation.
PAT/Total Assets and ROCE are not explained by Net sales as shown in the above table.
ROCE for the film business increased from 1 percent in 1990 to 19 percent in 1992.
659 which suggests that approximately 66 per cent impact on ROCE is explained by these independent variables while the remaining 34 per cent is because of some other variables that need to be explored.
Management believes that ROCE is a useful measure because it indicates the return on all capital, which includes equity and debt, employed in the business.
1% ROCE for global businesses in 2002, excluding Nalco, to be compared with 8.
To increase the industry's profitability by 25% as measured by ROCE by creating an educational system focused on the development of the basic, technical, business and leadership skills required for positions in the industry.
We have improved our financial performance the past three years to achieve our target ROCE range of 11-13 percent ROCE.
ROA and ROCE is annualized, except the special item of $6.
This ROCE improvement will be assisted by a recovery in natural gas prices and refining margins in North America and driven by continuous improvement in operating efficiencies, constrained capital expenditures, reduced operating costs, and a shift in the company's portfolio to 85 percent E&P over time.
ROCE from continuing operations, on an LTM basis, decreased to 15.
We continued our superior performance with a 5-year average ROCE of 24 percent and have increased the gap between ourselves and competition," said Tillerson.