Return on capital employed (ROCE)

Definition:

Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). The idea is that this ratio should at least be greater than the cost of borrowing.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Return on sales

A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage.

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