Return On Capital Employed - ROCE
Financial Dictionary — Financial Analysis
Definition
is a measure of how effectively the company is using its capital. The formula to measures the return on all the assets the company is using: Profit before interest and tax (PBIT) / (total assets - current liabilities)
Use cases, Example & Why it matters
Use cases
- Used to interpret financial statements and evaluate performance, liquidity, solvency, and efficiency.
- Used when comparing periods, peers, and forecasting outcomes.
- Used when comparing periods, peers, and forecasting outcomes.
Example
- Example: Analysts apply **Return On Capital Employed - ROCE** to assess trends and compare the company with industry benchmarks.
Why it matters
- Why it matters: Turns raw numbers into insights, supports decision-making, and highlights risks and opportunities early.