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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 ?
The observed low soil moisture levels near exposed nests and the expected relatively lower moisture levels of incoming warmer air may both reduce RH within the nest chambers, and represent another threat to the fungus culture and the brood (Stahel & Geijskes 1940; Roces & Kleineidam 2000; Bollazzi & Roces 2007).
After Poe's death due to a cardiovascular disease in 2004, his wife Roces joined a campaign that called for Arroyo's ouster for alleged cheating.
If Poe were alive today, "he would thank President Aquino for confirming him as a National Artist," said Roces.
Roces, based in Italy, is a worldwide leader in the design and production of inline and ice skates.
Prior to becoming Walmart's senior vice president of its small format division, Roces held a variety of leadership positions at Walmart including senior vice president of new business development and customer experience, president & CEO of Walmart Korea, and chief merchandising officer of Walmart Argentina.
of the 2006 acquisitions meet our ROCE targets although several are currently
That additional income would have increased ROCE to 17 percent, close to our target of 18 percent.
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.
The debug test event, designed to build cooperation with the InfiniBand([R]), iWARP and RoCE Ethernet communities, focused on industry-wide interoperability using the OFA software-a standards-based high bandwidth, low-latency networking stack for Remote Direct Memory Access (RDMA).
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.
RoCE is a new standard announced by the InfiniBand Trade Association.