ROCE

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ROCE (return on capital employed) - An indicator of the performance and profitability of an investment in which a trader's fixed capital is involved.

Higher ROCE means more efficient use of fixed capital. ROCE should be higher than the cost of equity capital of a public limited company, otherwise it means that the company is inefficiently using its capital and does not generate value for shareholders. ROCE is particularly useful when comparing performance of companies in capital-intensive sectors such as the media and telecommunications.

Unlike return on equity (ROE), which only analyzes the return on equity invested, ROCE also takes into account long-term interest-bearing debt, thus providing a better profitability analysis for businesses with significant levels of long-term debt.

ROCE is calculated as follows:

ROCE = EBIT capita & # x142; sta & # x142; y {\ displaystyle {\ text {ROCE}} = {\ frac {\ text {EBIT}} {\ text {capital}}}}

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