Also found in: Acronyms.


Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
References in periodicals archive ?
ROCE for the film business increased from 1 percent in 1990 to 19 percent in 1992.
companies experienced flat ROCE of 4.7% in 2003 compared to 4.5% in 2002, according to the report.
Evaluating an investment opportunity using ROCE involves projecting total net earnings and total capital requirements for the company or division for each year of the life of the investment, and calculating ROCE for each year.
Under these changes, the targets for ROCE and net debt ratio are abandoned.
In addition, RoCE improves storage access times by up to ten times, while using 50 percent less CPU resources compared to traditional transport.
Profitability was measured by the Return on Assets (ROA), Return on Equity (ROE), Return on Capital Employed (ROCE) and Return on Sales (ROS).
Prime zahranicni investice (PZI) jsou jednim z vyznamnych faktoru, ktery ovlivnil ekonomicky vyvoj tranzitivnich ekonomik po roce 1989.
(1) Vsechny tyto clanky vsak byly napsany jeste predtim, nez se naplno projevily dopady ekonomicke krize, ktera vypukla v roce 2008 a tezce zasahla radu zapadnich zemi.
The company said that these new offerings, based on standards for Converged Enhanced Ethernet (CEE), Fibre Channel over Ethernet (FcOE), RDMA over Converged Ethernet (RoCE) and iSCSI extensions for RDMA (iSER), will allow customers to build flexible service oriented networks for different application workloads and/or multi-tenant environments.
The ratings reflect the company's healthy financial risk profile, marked by low debt, comfortable debt protection measures, and adequate liquidity, and strong operating efficiency, and healthy return on capital employed (RoCE).
Out of these, top 100 companies ranked on the basis of Return on Capital Employed (ROCE) were selected to which following filters were applied: