imported>Doug Williamson |
imported>Doug Williamson |
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| __NOTOC__(ROCE).
| | ''Financial reporting.'' |
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| An accounting measure of management performance, calculated as the accounting profits divided by the total book value of the capital employed to earn the profits.
| | A revaluation reserve is a special, separate, accounting reserve recording the gains, net of any related losses, on the revaluation of tangible fixed assets. |
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| This measure needs care in its definition and application, because both the 'profit' and the 'capital employed' inputs can be defined in different ways.
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| | | Relevant accounting standards include Section 17 of FRS 102. |
| For example, depending on the context, the 'profit' may be either before tax or after tax.
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| Similarly, whilst 'capital employed' will always include an appropriate measure for debt, the measure of debt which is considered appropriate may differ, according to the context.
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| ===Simple before-tax ROCE based on operating profit and non-current liabilities===
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| A simple before-tax measure of ROCE is:
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| ROCE = Operating profit / (equity + non-current liabilities)
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| In this simple context:
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| 'Operating profit' is the before-tax profit measure, often the same as profit before interest and tax (PBIT); and
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| 'Non-current liabilities' are the relevant measure of debt.
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| ===Refining the measure of capital employed===
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| In other contexts, the measure of debt may be defined as net debt, in other words taking account both of shorter-term debt and of the netting off of most cash and cash-equivalent surpluses.
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| ===After-tax ROCE for EVA calculations===
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| When ROCE is used in the calculation of economic value added (EVA), its inputs are defined as:
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| Return = PBIT x (1 - Tax rate)
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| Capital Employed = Book value of Equity + Book value of Debt.
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| == See also == | | == See also == |
| * [[Accounting rate of return]] | | * [[FRS 102]] |
| * [[Book value]] | | *[[Reserves]] |
| * [[Capital employed]] | | *[[Tangible asset]] |
| * [[Debt]]
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| * [[Economic value added]]
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| * [[Equity]]
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| * [[Non-current liabilities]]
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| * [[Profit before interest and tax]] (PBIT)
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| * [[Profitability]]
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| * [[Return]]
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| * [[Return on assets]]
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| * [[Return on equity]]
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| * [[Return on investment]]
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| [[Category:Corporate_finance]]
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Financial reporting.
A revaluation reserve is a special, separate, accounting reserve recording the gains, net of any related losses, on the revaluation of tangible fixed assets.
Relevant accounting standards include Section 17 of FRS 102.
See also
