Return on capital employed (ROCE) is a financial ratio that measures the profitability of a company's capital investments. It is calculated by dividing the company's operating profit by its capital employed, which is the total amount of capital used to generate that profit.
Why is ROCE important?
ROCE is a useful measure of a company's efficiency in using its capital to generate profits, and it is often used to compare the performance of different companies within the same industry. A higher ROCE indicates that a company is generating more profit per unit of capital invested, and is therefore considered more efficient.
ROCE is typically expressed as a percentage, and it can be useful for investors and analysts to understand how effectively a company is using its capital to generate profits. It is important to note that ROCE is a relative measure and should be compared to industry benchmarks or the company's own historical performance to get a meaningful understanding of its performance.
Overall, ROCE is a useful financial ratio that can help investors and analysts to understand the profitability of a company's capital investments and to compare the performance of different companies.