Return on capital employed: Difference between revisions
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This measure needs care in its definition and application, because both the 'return' and the 'capital employed' inputs can be defined in different ways. | This measure needs care in its definition and application, because both the 'return' and the 'capital employed' inputs can be defined in different ways. | ||
When ROCE is used in the calculation of economic value added (EVA), its inputs are defined as: | When ROCE is used in the calculation of economic value added (EVA), its inputs are defined as: | ||
Revision as of 17:36, 11 November 2015
(ROCE).
An accounting measure of management performance, calculated as the accounting profits ('return') divided by the total book value of the capital employed to earn the profits.
This measure needs care in its definition and application, because both the 'return' and the 'capital employed' inputs can be defined in different ways.
When ROCE is used in the calculation of economic value added (EVA), its inputs are defined as:
Return = PBIT x (1 - Tax rate)
Capital Employed = Book value of Equity + Book value of Debt.
