Fundamentals & valuation
What is ROCE (Return on capital employed)?
Also called: Return on capital employed
Hinglish mein padhein: ROCE kya hota hai?
ROCE measures operating profit (EBIT) as a percentage of all capital used in the business — equity plus debt.
Because it includes debt, ROCE is a fairer comparison than ROE between companies with different borrowing.
A ROCE persistently above the cost of capital means the business creates value.
Related terms
- ROE (Return on equity)ROE is net profit divided by shareholders' equity. It shows how much profit the company makes on the money shareholders have invested.
- EBITDAEBITDA is earnings before interest, tax, depreciation and amortisation — a rough measure of operating profit from the core business.
- Debt-to-equity ratioDebt-to-equity divides a company's borrowings by its shareholders' equity. It shows how much the business relies on debt.